Brandix Enters into a Landmark FOREX Derivative with HSBC

In a first-of-a-kind derivative deal, HSBC partners Brandix Lanka in executing a 'Structured Derivative Solution' marking a new chapter in the annals of the country's history of derivative trades.

Brandix Lanka Ltd, an acknowledged leader in providing global apparel solutions, entered into a tailor-made "Structured Derivative Solution" with HSBC Hong Kong to manage their foreign exchange risk on GBP receivables. This solution, involving a combination of vanilla derivatives, would provide the company with the desired hedge against currency fluctuations while protecting the company's profit margins. The trade originates from HSBC Global Markets.

HSBC is already a leading market maker in the domestic foreign exchange, money and government debt market. It has recently raised the standard by increasing the breadth of the product range on offer, with the proposed introduction of derivatives (interest rate and foreign exchange derivatives) in all major currencies, including the rupee to be rolled out in 2 nd Quarter 2005.

David JH Griffiths, CEO of HSBC Colombo, expressed his Corporate's desire to introduce financial innovations from global markets to Sri Lanka. "HSBC's intentions are to help the local businesses to grow, taking the burden of their financial risks" Griffiths added. HSBC's Treasurer Sri Lanka Sachith Perera commenting on the nature of the deal said, 'HSBC is pleased to be associated with Brandix in this ground breaking deal bringing matchless solutions that combine HSBC's global expertise with local knowledge for the benefit of our valued clients".

Brandix Lanka CEO Ashroff Omar, complimenting the solution offered by HSBC stating that he sees "the arrangement as a positive move towards bearing risks of the international trade for Sri Lankan Corporates. The zero cost risk reversal option offered by HSBC will undoubtedly zero our risk in International trade". Kishan Jayasekera, Head of Group Treasury for Brandix adds, "This is in line with our strategy of finding innovative solutions to manage our risks while giving us the flexibility to ride on market volatility".

By entering in to this transaction, Brandix Lanka in effect is hedging their exposure to GBP/USD currency rates for tenure of six months. An additional feature in the structure allows cash flows to be net settled. The trade is for a notional amount of GBP 4.5million (US$ 8.5 million) and is a significant step towards proactive risk management by a Sri Lankan corporate.