Business Case Studies, Financial Management & Corporate Finance Case Study, Indage Vintners Limited

Code : INB0009

Year : 2011

Industry : Investment Banking, Financial Services

Region : US

Teaching Note:Available

Structured Assignment :Not Available

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Introduction:Interest rate swaps are one of the most commonly used credit derivatives , with an estimated notional market value of US$ 400 trillion worldwide. Nobody even knew about interest rate swaps till the first swap deal occurred nearly three decades ago, in 1982. Under the deal, Student Loan Marketing Association (Sallie Mae) swapped the interest payments on an issue of intermediate term, fixed rate debt for floating rate payments indexed to the three-month treasury bill yield.

However, the first interest rate swap deal between two corporates occurred a few months after the first deal, in March 1983. This deal was arranged by Salomon Brothers, a Wall Street investment bank, between B. F. Goodrich and Rabobank. At that time, both parties to the swap deal were experiencing hard times. The financial engineering of this deal helped them in a unique way and opened new doors for corporates to manage their finances.