Softlogic Finance and TCX seminar on ‘Currency Hedging’

Monday, 27 January 2014 00:00 - - {{hitsCtrl.values.hits}}

Softlogic Finance PLC together with TCX organised a brief seminar on ‘Hedging Currency Risk in Sri Lanka’ – an event that dealt with medium term currency hedging prospects in Sri Lanka, which took place on 22 January at Earls Court, Cinnamon Lakeside. The keynote presentation was delivered by Jerome Pirouz, Vice President, TCX and was followed by a panel discussion where he was joined by Naomal Goonewardena, Partner, Nithya Partners and Iftikar Ahamed, Managing Director, Softlogic Capital, while the Chief Guest of the event was Ananda Silva, Deputy Governor, Central Bank of Sri Lanka.

The objective of the discussion was to share the approach and expertise that Softlogic Finance had developed on such transactions, where the event primarily focused on hedging liabilities that rose from foreign currency borrowings which was undertaken by Sri Lankan entities, and sought solutions which organisations like TCX would be able to provide. In the final analysis it was concluded regarding the manner it allows borrowers to confidently obtain foreign currency funding that would fulfill their development objectives. Softlogic Finance announced that it had concluded the first-ever medium term Cross Currency Swap with an Off-Shore counterpart, when they completed a four year transaction for US$ 4,800,000 (Rs. 625,000,000) with TCX. The transaction would enable Softlogic Finance to cover their interest rate risk exposure in respect of medium term lending products that include leasing and hire purchase contracts which form the bulk of business for the company. The transaction is a groundbreaking deal and the first transaction for TCX in the Sri Lankan market, although TCX had engaged with a number of counterparts for some time to engineer their first transaction in Sri Lanka. Softlogic Finance had previously entered into a US$ 10 million foreign currency borrowing transaction with FMO and was only able to hedge their foreign exchange risk and interest rate risk on a short-term basis, due to the absence of medium term hedging alternatives in the local market.

The transaction with TCX enabled the company to cover a fixed period of four years, thereby eliminating the mismatch and locking in the interest margins on fixed rate advances. Softlogic Finance has been in the forefront of innovative strategies to enhance their funding capabilities and recently concluded a Rs. 1.4 billion guarantee transaction with the UK DFI GuarantCo who will provide a guarantee for Debentures issued by the Company that are expected to be Triple A rated, which is the first issuance in the country. Chairman of Softlogic Finance PLC Ashok Pathirage commenting on the transaction said: “We are pleased to conclude the first transaction with TCX in the market, and will continue to leverage the expertise that we have in the Treasury area to enhance and develop our business.” DFI’s that undertake financing in developing markets such as Sri Lanka require local lending institutions to maintain impeccable operating standards and adopt international best practices in order to secure these transactions and Softlogic Finance has successfully established its credentials in this regard. Softlogic Finance has specialist knowledge and expertise in the SME sector, and this funding line will be utilised to develop relationships with customers who require financial assistance to build their businesses and improve their livelihoods. Pix by Lasantha Kumara