Mastering Finance-Linked Swaps
A Definitive Guide to Principles, Practice & Precedents

By Gary Walker
Pearson Education / Financial Times
January 2004
ISBN: 0-273-66198-1
239 Pages, Illustrated, 6 ¾" x 9 ½"
$147.50 paper original

It is rare that a project lender, property development financier, PFI banker, MBO debt provider or securitization investor does not insist on its borrower taking out some form of interest rate and/or cross-currency hedging. By and large, however, the implications of integrating a swap into a structured financing are little understood and often ignored. At best, current practice is often misrepresentative and lax. This text offers clear, detailed, practical guidance on the key commercial, operational, legal and documentation issues that arise. It provides lenders, swap providers, borrowers, finance consultants and lawyers with the confidence and technical ability to ask the right questions at the right time, and to ensure that, whatever the nature of the financing, the swap is correctly integrated into the structure.

About the author. Disclaimer. Acknowledgements. Author’s foreword.
1 Introduction What is a finance-linked swap? Comparison with stand-alone derivatives Comparison with fixed rate loan arrangements Comparison with other finance-linked derivatives Size and shape of market Structural formats Current market practice
2 Swap and loan markets compared Similar but different? Economic differences Documentation differences Operational differences Legal differences Cultural and conceptual differences Does it matter?
3 Key commercial considerations Hedging strategy Economic symmetry Credit symmetry Prepayment Security and intercreditor issues Transferability
4 Key documentation considerations Swap documentation Loan documentation Security documentation Intercreditor documentation Ancillary documentation
5 Key legal and regulatory considerations Overview Capacity and authority Suitability Reliance Reputation, regulatory and litigation risk Advisor liability
6 Market-specific considerations Common themes Project financings Property financings PFI financings MBO financings
7 Repackagings and securitizations Overview Purpose of swap Illustrative structures Rating agency approaches and criteria Significance for swap documentation Significance for swap providers
8 Specialized applications Swaps linked to debt capital market instruments Share scheme hedges Swaps with AAA-rated derivative product companies Accrual swaps Building society applications Private client applications
9 Project managing finance-linked swaps Who manages? Managing the borrower Managing the lender/syndicate Managing the swap provider Managing the rating agencies Operational issues and timing Cost Post-drawdown issues and restructuring the deal
10 Conclusions What constitutes best practice? Barriers Drivers A vision for the future. Annexes. Bibliography. Index.

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