Syco SA, a distributor of food and food-related products, has announced it has signed an interest rate swap. The interest rate swap effectively converts the company’s

€100 million, 4.6 per cent interest rate bonds for a variable rate payment, which is the 6-

month EURIBOR minus 0.52 per cent. Why would Syco use a swap agreement? In other words, why didn’t Syco just go ahead and issue floating-rate bonds because the net effect of issuing fixed-rate bonds and then doing a swap is to create a variable rate bond?