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Frontclear concludes landmark transaction with Ghana’s Fidelity Bank and Societe Generale

JANUARY 2019 – Frontclear, Fidelity Bank Ghana and Societe Generale completed a USD40-million cross-currency total return swap transaction.  The trade marks a first-of-its-kind cross-border deal in Ghana and follows-on Frontclear’s two-year technical assistance to the country’s money market development.

Cross-border transactions in Ghana typically face operational and legal challenges, such as constraints to use local currency securities, enforceability concerns on key legal provisions of ISDA and GMRA documentation, cumbersome settlement processes and the economics of executing small trades in challenging markets.

The one-year cross-currency transaction is structured as a total return swap (TRS) involving an exchange of USD cash funding to Fidelity in exchange for Ghanaian Cedi government bond collateral. The bonds were transferred Free-of-Payment (FoP) at the local Central Securities Depository, an innovation facilitated through the support of local regulators.  The transaction is 100% guaranteed by Frontclear.

“The Ghanaian authorities and market participants are making notable progress in developing their local capital markets and Frontclear is proud to have supported these efforts with its technical assistance program in the past two years. The success of this deal confirms that with the right blend of institutions, instruments and market knowledge, local banks can competitively access and benefit from the international capital markets.” – Hugh Friel, Vice President Frontclear

“This trade not only allows Fidelity to diversify our funding sources but also paves the way for local market-wide use of Government of Ghana local currency security in multi-currency collateralized financing solutions for tenors beyond overnight. To get a transaction like this across the line for the first time required a lot of support from our global partners, local regulators and the Central Securities depository – Another first for Fidelity Bank Ghana Limited.  Leading the development of local broad based solutions with support of our local and offshore partners is at the heart of what we do at Fidelity Bank.  It is our vision to be a world-class financial institution with the ability to adapt world-class innovation for local application in a bid to positively impact Ghanaian businesses as a basis for driving an inclusive economic growth.” – Sam Kwame Aidoo, Group Head Wholesale Bank, Fidelity Bank Ghana

“This is Societe Generale’s first cross-currency total return swap in Ghana. It demonstrates how Societe Generale is expanding its offering of collateralised financing solutions, one of the key strengths of its markets’ franchise, by adapting the underlying, the jurisdiction and the format, and by partnering with development institutions like Frontclear. This transaction also illustrates Societe Generale’s commitment, made through its “Grow with Africa” program, to foster positive transformation across the African continent. We are delighted of this first transaction with Fidelity Bank Ghana and Frontclear,” comments Jérôme Sabah, Global Head of Rates, Credit and Forex Sales for Financial Institutions at Societe Generale

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Frontclear facilitates a transaction with Development Bank of Mongolia and Societe Generale

JANUARY 2019 – Frontclear arranged and structured back-to-back USD/JPY cross-border cross currency swap transactions for the value of USD 30 million with Societe Generale and Development Bank of Mongolia.

Credit, legal and operational risks have made it very difficult for Mongolian banks to access global capital markets.  This second landmark transaction of Frontclear in Mongolia has made it possible for Development Bank of Mongolia LLC (DBM) to competitively access the swap market with foreign banks and hedge the proceeds of a Samurai bond issue into USD.  Both cross currency swap transactions were documented under an International Swap and Derivatives Association (ISDA) agreement, whereby Frontclear customized the swap confirmation to overcome legal issues in the Mongolian market.

The transactions helped to further clarify certain legal issues related to close-out netting in Mongolia, which were mitigated by effective Frontclear deal arranging and structuring.  The transaction documents introduced best practice operational and legal concepts, which were reviewed and discussed in a Frontclear organized Executives’ Roundtable in Ulaanbaatar in September 2018.  Frontclear is already planning further technical assistance in Mongolia to address those legal issues as well as other roadblocks preventing Mongolian banks effecting accessing global funding and swap markets.

“We are proud to execute our second transaction in Mongolia and the key role we have played in originating the structure and bringing Société Générale to work in money market transactions in the country. The transaction strengthens Mongolian banks’ ability to mitigate legal and operational risks and sets a benchmark for the development of Mongolia’s money market going forward,” according to Andrei Shinkevich, Senior VP at Frontclear.

“This is DBM’s first ever swap transaction with Societe Generale and we look forward to working with new partners to expand our treasury operation,” Amgalan Battulga, Head of Treasury Management of Development Bank of Mongolia noted.

“Societe Generale is delighted to have concluded this transaction with Frontclear allowing Development Bank of Mongolia to hedge interest rate and currency risks related to its Samurai bond. It illustrates the strength of the collaboration between our two institutions, Societe Generale and Frontclear, which share the common objective to participate to the development of capital markets in emerging countries,” Jérôme Sabah, Global Head of Rates, Credit and Forex Sales for Financial Institutions at Societe Generale said.

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