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Options of converting a parent company loan into.

Bismark Adjei-Acheampong. MBA. B.Com's Profile

We are a subsidiary of a US company in Ghana. The FX rate and interest rate on the loan is becoming too much for us. We want to convert the loan into other options. What options are available to us? Bismark.

Answers

David OBrien
Title: Treasury Consultant
Company: EE Treasury
(Treasury Consultant, EE Treasury) |

Bismark:

The loan having been made the only viable alternative is to convert same to capital from parent. Going forward the sub could Dividend monies in order to make return some of the new capital.

Of course, the Dividends would be subject to US tax.

Questions:
At what rate is the loan? If it is USD based it should be no more than 2%.
In so far as the foreign exchange is concerned, if it is hedged then the gain/loss on the hedge should offset the gain/loss on the revaluation of the loan.

David L. O'Brien, CTP
Consultant in Treasury

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