Cancelling debt via currency movement

Discussion in 'Strategy Building' started by toc, Jul 31, 2005.

  1. toc

    toc

    Here is a strategy scenario for corporate finance creatives:

    A company under US$80M long term debt at 8%.
    70% operations and sales in US and 30% in Canada.
    Company sales are roughly $200M total.

    Assuming that in coming months US$ will correct by 20%,
    what strategy should the CFO employ so that he benefits from this currency movement in order to cancel out some of the debt.
    Without taking more than average risk.

    Any derivatives action to be employed here? The interest payments for debt are eating up resources allocated to other areas like cutting edge R&D.

    Cheers!