Liability Management refers to managing risks inherent in foreign currency denominated liabilities, which include syndicated loans, market debt in the form of FRNs and MTNs, and quasi-equity such as FCCB and convertible preference shares. The risks are primarily conversion risk, interest rate risk and translation risk.
The service is tailored for companies with large loan portfolio / global market borrowings, which generally have medium to long-term FX and interest rate exposures. We provide regular MTM valuation of loans with analysis of risk-free rate of interest and credit premium, which translate in to “refinance driver’.
As a corollary, similar services are rendered to corporates with global asset portfolio, where hedging of net investment is considered against translation risk or for protection of redemption value.
- Weekly / monthly Mark-to-Market (MTM) valuation of loans to monitor currency and interest rate risks
- Hedging Strategy for currency and / or interest rate risks
- Evaluation of derivative instruments for hedging the risks
- Accounting valuation for loans, including FCCB, using effective interest rate method and fair value method (the latter for disclosures)
- Valuation of embedded derivatives, etc.
- Effectiveness testing of swaps and long-term options