Derivatives Advisory Services

Banks often require borrowers to enter into interest rate swaps, but it is difficult for borrowers to understand the cost and the financial implications of these contracts. Pricing is not transparent and sometimes the cost is significantly more than expected.

Porter, White & Company provides the experienced professional support for clients to successfully negotiate and execute derivative transactions, such as interest rate swaps. We provide, among other things, transparency on pricing, analysis of the financial implications of documentation, assistance in structuring, or access to a specific market.

Most businesses use risk management in one form or another by focusing on the risks where the company has expertise, such as selling and building a particular type of machinery or acquiring and developing land, and seeks help in hedging risks where the business does not have particular expertise, such as interest rate risk or price risk of raw material. Hedging risks is often done using derivative instruments such as futures and forwards, swaps, and options. However, the actual structuring and implementation of derivative transactions is an area that requires specialized knowledge and most businesses cannot afford to keep this expertise in house.

PW&Co provide this knowledge and sits on its clients’ side of the table when negotiating and transacting derivatives. Many “fixed rate” loan agreements are a combination of a variable rate loan and a swap and both are profit centers for many banks. Companies sometimes turn to the selling bank for advice about the derivative being presented, which is akin to asking the salesman if the deal is good.

Derivatives Advisory Services, continued >>

Jefferson County, Alabama Swaps
Mistakes in the use or execution of swaps have been an all too frequent occurrence in recent years, including in the case of Jefferson County, Alabama where PW&Co issued, in January 2007, the first comprehensive publicly available valuation of the County’s outstanding interest rate swaps.

For more information, please contact Johan Grahs.