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| Sunday, 1 May 2005 |
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HSBC in $8.5 million derivative deal with Brandix Lanka by Hiran H. Senewiratne HSBC, one of the leading overseas banks in the country has offered Brandix Lanka (BL), a structured solution for Sterling Pounds 4.5 million (US $ 8.5 million) as a first-of-a-kind derivative deal in the country recently. Brandix Lanka Ltd, a leading corporate in the apparel industry has tied up with HSBC to enter into a tailor-made "Structured Derivative Solution" in a bid to manage their foreign exchange (pound sterling) receivables. Moving into a new structural era will help companies to manage their financial risk in a futuristic manner, HSBC Chief Executive Officer (CEO) David Griffths said. He said that most of the Sri Lankan companies do not have a culture on risk management system which is the need of the hour, when companies venture into global markets. The Bank has also proposed to extend this derivative (interest rate and foreign exchange derivatives) to all major currencies, including the Rupee in the second quarter of this year. At present this applies to US dollars and Sterling Pounds, Griffths said. This solution would provide the company with the desired edge against currency fluctuations, while protecting the company's gross profit margins, BL CEO Ashroff Omar said. He said that the company intends to enter the UK market in the future, and therefore this deal in effect, is hedging their exposure to pounds sterling or US dollar currency rates for a tenure of six months. Under this deal many opportunities could be grabbed in the event of currency fluctuations which could be considered as a win-win situation for the exporter and the buyer, Omar said. An additional feature in the structure is that the cash flow would be net settled. The trade is for a notional amount of Sterling Pounds 4.5 million and is a significant step towards proactive risk management by a Sri Lankan corporate. |
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