Since the mid-1980s, Bracknell-based PRG has built a successful business providing clinical research services to the pharmaceutical and biotechnology industries. In 2005, the company consolidated its already profitable operations in Europe and the US with the acquisitions of EP Euro Pharmacy in Germany and US company Pharmdata Inc. Both loans were arranged in the relevant local currencies for these deals.
“We did our research on interest rate trends in the US and in Europe,” says Bernard Gallagher, financial director of Premier Group Research. “We took the view that the rates in both countries were going to drop. This made us reluctant to lock into a fixed-rate agreement on both loans because we didn’t want to pay a premium above the prevailing floating rate should our predictions be realised.”
At the same time, PRG wanted protection against rises in interest rates: “We quickly realised they would be costly for us and potentially affect our budgeted cash flow in those countries.”
To meet these objectives, we recommended an Enhanced Interest Rate Collar structure for both the European and US loans. This ensures Premier Research pays no more than the rates it budgeted for. It’s a flexible arrangement that also offers PRG the opportunity to benefit from favourable movements in interest rates within the boundaries of the structure.
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