Public Finance

Swaps & Derivatives

Using a swap or a derivative transaction to lock in a better rate or lower your interest rate on your debt obligations is only effective if all your risks are transparent. With these financial tools, it is critical for you to have attorneys who know the ins and outs of the products and what it means, both in the short- and long-term future, to enter into these agreements. Our attorneys have vast experience with interest rate swaps and other derivative products, and we are adept at understanding how a transaction will meet your objectives and fit within debt covenants.

Our practice is highly involved with innovative applications of sophisticated financing techniques. In addition to serving debt issuers and obligors in connection with the utilization of interest rate swaps and other derivatives to hedge risks, we have drafted statutes authorizing the use of swaps and other hedges by governmental entities and helped many clients develop swap policies and assist in compliance. Our attorneys advise on regulatory issues affecting market participants, including filings and compliance. We have assisted clients in terminating or novating swaps. We have also served as counsel to public and private entities in connection with the use of high-volume commodity swaps to hedge fuel costs

Quick Facts

  • Experience representing governmental clients in connection with interest rate swaps dates back to the early 1990s, the genesis of swaps in the municipal market
  • 100+ transactions, with an aggregate notional amount in excess of $10 billion

Areas of Focus

  • Caps
  • Forwards
  • Fuel hedges
  • Options
  • Interest rate swaps
    • Basis swaps
    • Fixed to floating
    • Floating to fixed
    • Total return swaps

Representative Experience

  • Drafted the statute authorizing the Commonwealth of Massachusetts to enter into interest rate swaps and other hedges.
  • Represented the Commonwealth of Massachusetts in connection with its first swap agreements in 1990, associated with the fiscal recovery bonds issued that year.
  • Represented the Commonwealth of Massachusetts in most of a succession of synthetic fixed-rate financings it undertook beginning in 1997.
  • Advised the Massachusetts Treasurer’s office on achieving as much standardization as possible in the state’s swap documents, a project that led to the negotiation of new ISDA master agreements with several counterparties.
  • Represented Massachusetts in all its swap terminations, including the terminations precipitated by the Lehman bankruptcy in 2008, and developed in-depth knowledge of the close-out provisions and replacement mechanics.
  • Represented the Commonwealth in connection with three recent swap novations.
  • Represented the Massachusetts Bay Transportation Authority (MBTA) in connection with each of its swaps, swaptions, and fuel hedges, including termination of the trades with Lehman Brothers in 2008 and the follow-on matters with the bankruptcy court.
  • Served as bond counsel to the Massachusetts Educational Financing Authority (MEFA) on using its synthetic fixed-rate bond program to finance its fixed-rate lending for many years.
  • Represented Massachusetts Educational Financing Authority (MEFA) on all its variable rate issues, which were swapped to fixed, using an innovative competitive bid process among pre-qualified swap providers, for a number of years.
  • After the collapse of the auction rate securities market, represented Massachusetts Educational Financing Authority (MEFA) in a fixed-rate refunding that retired a substantial amount of the auction rate securities and resulted in the termination of all the associated swaps.
  • Represent a large conduit borrower with a substantial portfolio of synthetic fixed rate debt, including handling all the swaps, using competitive bidding with prequalified counterparties, and the novation or reallocation of a number of those swaps when the mode was changed on the variable rate debt.
  • Provide ongoing counsel to a client on its swap program it maintains as part of its endowment and pension fund investment program, including a number of swaps other than interest rate swaps.
  • Represented clients in a substantial number of typical refundings and conversion of synthetic variable-rate issues with swaps for small to moderate conduit borrowers, with every imaginable end result for the associated swap, ranging from termination for cash, to novation, to reallocation to other uses.

Representative Clients

  • Commonwealth of Massachusetts
  • Massachusetts Bay Transportation Authority (MBTA)
  • Massachusetts Educational Financing Authority (MEFA)