Currency Choice and the Global Borrower

A securities-backed loan begins with a straightforward question: which currency will govern the facility? For a borrower whose shares trade on a local exchange in one currency but whose spending needs are overseas, the answer is rarely obvious. Borrowing in the collateral currency eliminates translation risk on the loan itself but may leave the borrower exposed to exchange movements when converting proceeds to the target currency. Borrowing directly in the destination currency — say US dollars or euros — removes that conversion step but introduces a basis between the loan obligation and the collateral value. Neither approach is inherently superior; the optimal choice depends on the borrower’s broader balance sheet, income streams and the currencies in which obligations will eventually be settled. Black Haven structures facilities in major currencies and approaches each mandate with an analysis of these cross-currency dynamics before terms are finalised.

Many borrowers approach securities-backed financing with a clear purpose: funding an acquisition denominated in a specific currency, meeting a capital call in another jurisdiction, or refinancing an existing obligation in a third. In each case, the destination currency is effectively fixed, and the exercise becomes one of minimising unnecessary currency conversion. Where the collateral and the use of proceeds share a currency, the structure is straightforward. Where they diverge, the borrower may consider entering into a cross-currency swap alongside the loan, effectively locking in an exchange rate over the life of the facility. Black Haven works with borrowers to understand the full picture of their obligations before proposing a structure, ensuring that currency risk does not undermine the purpose the financing was meant to serve.

Currency markets can move substantially over multi-year loan tenors. A facility that appears comfortably over-collateralised at inception may come under pressure if the collateral currency depreciates materially against the loan currency over time. Borrowers with long-horizon liquidity needs should therefore consider whether a shorter initial tenor with renewal options better suits their currency outlook than a single long-dated facility. Equally, those with recurring income in the collateral currency — dividends, for example — may find that natural cash flows provide a partial hedge against adverse exchange movements. Black Haven takes a long-term view of borrower relationships, structuring facilities not merely to be executable at signing but to remain manageable across a range of scenarios throughout their life.