Swaps
Yeah, we know the lender wants you to use their swap desk.
We've worked on thousands of swaps and nearly every one has been a direct negotiation with the lender's swap desk.
Lenders might be prohibited from requiring that you use their swap desk, but you usually have to anyway because lenders will use the real estate to secure both the loan and the swap. If you try to swap with a third party provider, they will usually want cash collateral - which drives you right back to the lender.
We negotiate with the lender on the swap terms just like you negotiate the loan terms.
What banks are charging right now on comparable deals
What are reasonable hedge requirements
Live pricing at closing, so they execute at the best level
Spread-to-offer vs. Dodd-Frank mid, and how it hits you
Floor considerations and their impact
Monthly mark-to-markets after execution
Hedge strategy docs
Hedge memos
An experienced ISDA attorney coordinating with your counsel
You are in charge. Our job is to unmuddy the waters, provide guidance, and negotiate only as hard as you want. The swap is one component of a loan closing, and we complement the relationship and add transparency. We have never, and will never, jeopardize a relationship or a closing.
If I'm the one paying for Pensford, why do you care if they're involved?
Our first client ever, to his bank
The conversation goes well beyond today's rate.
A swap is a multi-year commitment, and the right structure depends on your plan. These are the questions we work through before anything is executed.
- StrategyHow much rate risk is worth carrying, and how much is worth paying to remove.
- Prepay flexibility & breakageExit options and what it costs to unwind the swap early.
- Hybrid structuresBlending fixed and floating to fit the business plan.
- Exotic structuresCancellable swaps, collars, swaptions, and corridors.
- Loan / swap mismatchesWhere the hedge and the loan don't line up, and the fix.
- Forward startingLocking a rate now for a funding that closes later.
When is the best time to get us involved?
Most clients begin working with us during term sheet negotiation. That ensures an apples-to-apples comparison and no surprises at the closing table. And if you go with financing that doesn't involve a swap, you don't owe us anything.
We want a relationship, not a transaction.
Regional banks are some of the biggest players.
Standing up and maintaining a swap desk is prohibitively expensive for many regional banks. Instead, they set up a back-to-back relationship with a larger bank, and to arrange it they bring in a hedge advisor. The net effect is a lot of extra mouths that need to be fed, each adding a layer of markup to your rate.
Layers of markup
Basis points, illustrative. The more parties in the chain, the more your rate absorbs. We make each layer visible.
Bring us in at the term sheet.
We'll benchmark the desk, negotiate the terms, and keep the whole thing transparent, start to close.