ROYAL BANK OF SCOTLAND HAS NEW DERIVATIVE PRODUCT

Prompted by rising interest rates earlier this year, the Royal Bank of Scotland devised a derivative-based borrowing product geared specifically to shipowners. The new product, called the Guaranteed Callable Swap, allows companies to unwind a hedge for a maximum cost of 1% of the notional principal, if the swap turns against their favor, or is out of the money.

Basically, interest rate swaps are used to reduce financing costs by rolling over a loan and borrowing again, thereby creating the potential for quality spread differentials with firms of better credit ratings.

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