Search
 

Bronze AHA Winner in Financial Risk Management

Floating-Rate Savings: Honeywell International

By Staff Writer | Updated on November 01, 2011

A planned 10-year debt issue and market uncertainty regarding future interest-rate moves led Morristown, N.J.-based Honeywell to undertake a detailed study of interest-rate cycles over the past 60 years. This research revealed that the forward curve for the London interbank offered rate (Libor) tends to over-predict future rate cycles. The challenge was to benefit from these findings by increasing the $37 billion company’s floating-rate debt exposure to reduce its overall interest expense.

With an existing floating rate debt exposure of 13%, Honeywell undertook a peer group study and from that set 55% as its upper limit. It used scenario analysis on its $7.6 billion debt portfolio to assess how different levels of floating-rate debt would affect the company’s earnings per share over a 10-year period. As a result of the analysis, in the first quarter of 2011 Honeywell swapped its $800 million 10-year note to floating upon issuance. The swap was executed by Barclays, one of the bond’s three bookrunners.

Complete your profile to continue reading and get FREE access to Treasury & Risk, part of your ALM digital membership.

Your access to unlimited Treasury & Risk content isn’t changing.
Once you are an ALM digital member, you’ll receive:

  • Critical Treasury & Risk information including in-depth analysis of treasury and finance best practices, case studies with corporate innovators, informative newsletters, educational webcasts and videos, and resources from industry leaders.
  • Exclusive discounts on ALM and Treasury & Risk events.
  • Access to other award-winning ALM websites including PropertyCasualty360.com and Law.com.

Already have an account?

NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.

Recommended Stories

Why Companies Are Racing to the U.S. Debt Market

Why Companies Are Racing to the U.S. Debt Market

Caleb Mutua & Jeannine Amodeo |

Borrowing costs have become compelling, as markets are already pricing in expectations for reduced interest rates. And several external factors could reverse that trend.

Treasury & Risk

Join Treasury & Risk

Don’t miss crucial treasury and finance news along with in-depth analysis and insights you need to make informed treasury decisions. Join Treasury & Risk now!

  • Free unlimited access to Treasury & Risk including case studies with corporate innovators, informative newsletters, educational webcasts, and resources from industry leaders.
  • Exclusive discounts on ALM and Treasury & Risk events.
  • Access to other award-winning ALM publications including PropertyCasualty360.com and Law.com.

Already have an account? Sign In Now
Join Treasury & Risk

Copyright © 2024 ALM Global, LLC. All Rights Reserved.