Interest Rate Management
Whether your business is undertaking a significant investment to acquire a competitor, launch a new product or service, expand operations into new markets, or pursue a recapitalization to reward ownership, management and shareholders can benefit from the ability to customize the interest rate/expense and debt service requirements of the firm’s present and future indebtedness.
Our Capital Markets Interest Rate Management solutions allow you to effectively and efficiently customize your business’s cost of debt and the attendant cash flow requirement to align with the firm’s operating earnings and cash flow production. Doing this can help reduce financing costs, eliminate the need for premature refinancing of borrowings, and improve profitability and capital efficiency.
Finally and most critically, our customized Interest Rate Management solutions can help enable the hedging of your business’s operating cash flows and the fair value of your balance sheet against adverse interest rate movement/volatility and unnecessary expense. Simply put, we can help appropriately hedge your firm’s interest rate risk, effectively reduce the cost of your enterprise's debt, and enhance the business’s ability to meet its targeted financial returns.
Financial transactions in which customized Interest Rate Management solutions may provide significant benefits to your business include:
- Acquisitions, new product or service capital investments, and market expansion
- Leverage recapitalization, debt restructure, and conventional term debt refinancing
- Hedging rate risk on planned future borrowings or issuance of debt securities (bonds or notes)
Fifth Third Bank’s customizable Interest Rate Management solutions include:
Interest Rate Swap
An Interest Rate Swap is a customized contract between two parties to exchange a series of interest rates or payments.
- An efficient solution for helping manage your company’s interest rate exposure and expense
- Allows borrower to convert from a floating rate to fixed rate—partial or full notional on a present or forward starting basis—to align debt service requirements and interest expense with operating cash flow production cycle without having to refinance underlying indebtedness, and hedge against rising rates
- Allows an issuer to convert from a fixed rate to a floating rate—partial or full notional on a present or forward starting basis to hedge fair value of debt security/obligation—to recompose rate structure and interest payments of debt to align with operating cash flow production and reduce cost of debt without having to redeem underlying security, and position for falling rates
- Enables determinability of future operating and financing cash flows and accurate forecasting of interest expense
Interest Rate Cap
An Interest Rate Cap is a customized contract that establishes a “ceiling” or maximum rate (cap strike) on a floating interest index for a specific term.
- Allows borrower to benefit from low and/or falling floating interest rates while protecting against and limiting the cash flow and interest expense requirement of future rate increases
- Provides variable interest rate protection at a predetermined maximum rate—partial or full notional on a present or forward starting basis—for a managed up-front cash premium
Interest Rate Collars
An Interest Rate Collar is a customized contract which combines an interest rate cap with an interest rate floor to establish a maximum range of movement for a floating interest rate index.
- Allows borrower to benefit from low floating rates while protecting against future rate increases at a reduced up-front premium, or no premium if structured as “cashless”
- Enables borrower to contain interest rate risk/expense and cash flow requirement within a predetermined range on a partial or full notional and present or forward starting basis
Find out more about our Interest Rate Management. Contact our Fifth Third Bank Interest Rate Management team.
Subject to credit review and approval.