Geblitzt!: Read the current LPA Geistesblitz issue “SwapCap, when the desired hedging maturity exceeds the loan maturity.”
The positive development of the real estate markets and the current low financing costs tend to obstruct the view at the risks of long-dated real estate financings. Increased property values, a low yield environment and a positive outlook foster a gold rush situation. However, a study by the rating company SCOPE looks at potential drawbacks such as high debt service coverage ratios ( debt / EBITDA ) to be observed despite this favourable business environment. We like to take these concerns as a starting point to propose a solution for the companies’ high interest rate sensitivity. The SwapCap is a long-term interest rate hedging solution with a reduced trading line requirement. It gibes banks the opportunity to offer their customers an interest hedging rate strategy, which significantly exceeds the underlying loan term.
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