Situation
Maya and Terrance Wilson have always wanted to grow their Nashville, Tennessee based multi-car dealership business to Memphis, where Terrance’s parents live. The couple was recently approached with an opportunity to expand their business by bidding on and acquiring additional dealerships in Memphis.
Our Approach
The Wilsons immediately called their J.P. Morgan team for advice. The team thoroughly reviewed a variety of financing options for the Wilsons, and after careful consideration, the Wilsons decided that the best fit was a partnership with the J.P. Morgan Global Derivative Solutions team. The team helped the Wilsons to understand the current interest rate environment, offer instruments which could help mitigate rising cost of interest, and as a result guide them with a strategy for financing and the associated risk management.
Outcome
Maya and Terrance were able to draw down on a floating rate portfolio line of credit and mitigate their interest rate risk via an interest rate swap. By entering into a swap, the Wilsons obtained a lower rate than a comparable fixed rate loan while retaining the portability of the fixed rate swap hedge and flexibility to restructure the loan. With a lower interest rate due to the interest rate swap, the pair was able to purchase a few dealerships in Memphis without major impacts to their balance sheet.