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Interest rate hedging

Make your company’s cash flows more predictable by hedging your debt servicing costs against unfavourable changes in interest rates. Hedging against higher interest rates forms a part of a company’s risk management strategy, helping you improve the predictability of your business operations.

Benefits for your company:

  • Reduce the effect of uncertainty related to interest expenses and unfavourable movements in interest rates on your business and its profitability
  • Make your cash flow more predictable

The more variable-rate debt your company has, the higher the risk involved in interest rate fluctuations. We will help your company find the optimal interest rate hedging solution to manage its risks and costs. We will take a holistic view of your loan portfolio, and when your company’s situation changes, we will help you find new solutions.

You can manage your company’s interest rate risk with different solutions, the most typical of which are the interest rate swap, interest rate cap and interest rate collar. These hedges will be adjusted to suit your company’s profile, taking into account the market situation. 

Interest rate swap

The variable rate on your company’s loan can be changed to a fixed rate, or vice versa, using an interest rate swap. Separate from the loan, a swap is an agreement that allows you to hedge against a rise in interest rates. An interest rate swap can be used to hedge your company’s entire loan portfolio or individual loans, regardless of the lender.

Interest rate cap

An interest rate cap ensures that the reference rate on your loan will never exceed a certain level if interest rates go up, but it will decrease if interest rates go down. A separate hedging fee is charged for the interest rate cap, and it is determined on the basis of the cap level and period of validity, as well as the amount of the loan hedged. 

Interest rate collar

An interest rate collar ensures that the reference rate on your loan stays within agreed limits for an agreed period of time. The lower limit of an interest rate collar fixes the minimum level for the reference rate. The upper limit functions like an interest rate cap, ensuring that the reference rate never exceeds the maximum level you have agreed on with us. There is no separate hedging fee for an interest rate collar.

We will help you manage your interest rate risks

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