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Hello!
I would kindly appreciate any help on the following interest rate swap related question.
The thing is about forward start amortizing swap.
The IRS contract has a notional of 100 MUSD that shall start in 24 months time exchanging a 3 month LIBOR for a fixed 5 year SWAP rate. The loan to be hedged is under disbursement and there is a grace period set. It is likely that the grace period will end after 24 months so the beginning of loan capital payments will match with the start of the SWAP contract. However, there is a slight problem. As per loan contract, the grace period may end sooner than 24 months.
Linked to all that is my question.
Q: If the SWAP contract is entered now specifying the best estimate for the start of capital payments would it create problems with the SWAP contract if the grace period will in reality end couple of months earlier?
What do you guys say? If that is the case, is there a possibility to make precisions to the to the start date of the contract at a later stage when it will be precisely known?
If there is too little info, I will be happy to provide such.
Thank you very much in advance, any discussion is appreciated!
CapCooler
I would kindly appreciate any help on the following interest rate swap related question.
The thing is about forward start amortizing swap.
The IRS contract has a notional of 100 MUSD that shall start in 24 months time exchanging a 3 month LIBOR for a fixed 5 year SWAP rate. The loan to be hedged is under disbursement and there is a grace period set. It is likely that the grace period will end after 24 months so the beginning of loan capital payments will match with the start of the SWAP contract. However, there is a slight problem. As per loan contract, the grace period may end sooner than 24 months.
Linked to all that is my question.
Q: If the SWAP contract is entered now specifying the best estimate for the start of capital payments would it create problems with the SWAP contract if the grace period will in reality end couple of months earlier?
What do you guys say? If that is the case, is there a possibility to make precisions to the to the start date of the contract at a later stage when it will be precisely known?
If there is too little info, I will be happy to provide such.
Thank you very much in advance, any discussion is appreciated!
CapCooler
