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case study

GLOBAL REAL ESTATE FUND MANAGER (>$50BN)

Background

Existing swap valued at (£10m)

450m
£450m debt facility
5
5 year maturity
2
2 one year options to extend

Factors to consider

  • Existing hedging portfolio
  • New draft facility agreement
  • Asset management plan
  • Regulatory and accounting issues
Speak to an expert

Shripal Shah

Director

E: Shripal.Shah@jcrauk.com
T: +44 (0)207 493 3310

Our approach

Recommended optimal hedging solution in light of all factors.

Stress tested our solution to assure a robust strategy.

Coordinated lending banks and benchmarked pricing to ensure it was fair.

Highlighted highly adverse term in overall financing structure that was unnoticed by the borrower.

Helped negotiate substantial compensation for this through other terms of the hedging strategy.

Assisted with the regulatory requirements and reviewed the hedge documentation.

Explore what we do

Implications

  • Fund classified as a FC under EMIR leading to risk of having to collateralise derivatives in future.
  • Derivative instruments had to be brought onto the balance sheet.

Benefits of our approach

  • Our solution addressed our client’s concerns around the risk of having to collateralise the fund’s derivatives in future while also obtaining a satisfactory accounting treatment.
  • The cost effective hedging strategy fitted well with the asset management plan, ensuring the hedge helped lower the risks of a cash flow issue rather than exacerbate them.
  • We saved our client over £1m by spotting the key adverse term included by the banks and helped to negotiate compensation.
  • Further cost savings generated on hedge execution from price improvements via benchmarking exercises.
  • Regulatory and accounting issues were considered:
    - Fund classified as an AIF.
    - Fund was transitioning from UK GAAP to FRS102 for the first time.

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How can we help you

Have you got a question about how you hedge your financial risks, or structure and arrange your debt?

Find out how we can help you by contacting us today.

 

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