Last Minute Transparency Creates $75,000 Reduction
Borrower saves $75,000 in hidden swap fees
It was your standard transaction – a borrower refinancing its load. In this case, the borrower had to also unwind a swap with SunTrust Bank and enter into a new swap with BB&T. The borrower, a national sorority, was aware of all the fees and charges that had been disclosed by the banks, but was unaware of the hidden fees that were not being disclosed…until its attorney decided to take an extra step and do some research.
As a result of that research, the attorney and CPA for the borrower decided to engage Swap Negotiators. Once Swap Negotiators reviewed the documents, two facts became apparent. First, that SunTrust Bank was charging nearly $50,000 more than the actual par value on the unwind and that BB&T was charging more than $100,000 of undisclosed fees on the new swap. By this time, the parties were virtually at the point of no return. It was too late to start the bidding process over in order to seek competitive pricing on the swap, and it was far too late to do anything about the SunTrust swap documents that allowed SunTrust to be the calculation agent.
In this case, it was a combination of transparency and reasonableness by the banks that created the savings. Once the added profit on the termination became public knowledge, SunTrust agreed to reduce that fee to a more acceptable level. BB&T then agreed to a spread that was more reflective of the risk associated with the transaction rather than an arbitrary number that was unilaterally applied without the borrower’s knowledge.
In all, the borrower saved more than $75,000 in fees and has new documents that will give them better controls should they ever terminate their new swap. Most importantly, the borrower and the clients of this attorney and CPA will have a great knowledge advantage that will convert to savings the next time they need to enter into a swap.
“I retained the Swap Negotiators team to assist with the unwind of a complicated swap and to help negotiate a replacement for a client in a recent commercial refinancing package. They proved their experience and value in that transaction by negotiating savings far in excess of their fee. My client and I were very pleased with the outcome.” John I. Harris, III of Schulman, LeRoy & Bennett, PC