A Structured Approach
Simplified for Borrowers
Step 1: Assess the Borrower’s Position
Many borrowers today carry floating-rate U.S. debt. As interest costs rise, cash flow tightens and debt service coverage ratios fall.
Step 2: Structure the Swap
Through a cross-currency swap, the borrower exchanges U.S. dollar obligations for obligations in another currency with lower benchmark rates (e.g., yen).
Payments are recalculated at the lower foreign currency rate (plus a margin).
A margin deposit (~5% of loan balance) is posted to align incentives.
The borrower still operates in dollars — the swap is behind the scenes.
Step 3: Model & Explain
We guide clients through the mechanics with clear modeling:
Projected savings versus status quo.
Risk exposures under different interest and FX scenarios.
Break-even and stress case analysis.
Step 4: Hedge Strategy
Every borrower has different goals — stability, short-term relief, or long-term savings. We help identify the hedge strategy that fits, whether it’s a straightforward swap or a layered hedge with risk protection.
Step 5: Execute & Monitor
Our hedge fund partners, with 100+ prior transactions, handle execution. We ensure borrowers understand the terms and ongoing obligations.