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====The Loan and the interest rate hedge==== | ====The Loan and the interest rate hedge==== | ||
Mr. Leach, of Greenclose, was one of those fabled little old ladies of the law. He was also, the court found, a sophisticated and successful owner of family business running small luxury hotels in and around Wales. But he also seemed to be the wrong end of the [[interest rate swap mis-selling scandal]], wherein NatWest and others lent to mid-sized corporates on condition that they enter a derivative to their hedge interest-rate risk. In Leach's case, Greenclose was obliged to buy a rate collar for five years, and to grant the bank an option to extend it for seven years. | Mr. Leach, of [[Greenclose]], was one of those fabled little old ladies of the law. He was also, the court found, a sophisticated and successful owner of family business running small luxury hotels in and around Wales. But he also seemed to be the wrong end of the [[interest rate swap mis-selling scandal]], wherein NatWest and others lent to mid-sized corporates on condition that they enter a derivative to their hedge interest-rate risk. In Leach's case, Greenclose was obliged to buy a rate collar for five years, and to grant the bank an option to extend it for seven years. | ||
The notional point of the hedge was to protect Greenclose against interest rate rises over the term of the loan: interest rates being an uncommonly low 4.5% in 2006, and generally expected, in those good old days, to shortly rise. | The notional point of the hedge was to protect Greenclose against interest rate rises over the term of the loan: interest rates being an uncommonly low 4.5% in 2006, and generally expected, in those good old days, to shortly rise. |