How derivative collateral and CSA design failures quietly immobilised liquidity without any hedge failure or asset stress.
Sector: Infrastructure – Operating Assets
Asset Class: Transport Infrastructure (Regional Airport)
Situation Type: Operating asset with floating-rate debt hedged via bilateral swaps under asymmetric CSAs
Primary Issue: Structural capital inefficiency driven by CSA design and collateral mechanics – not hedge failure or asset stress
The Situation
A mature regional airport operated with stable traffic recovery and cash flows consistent with underwriting.
Floating-rate acquisition debt was hedged using vanilla interest rate swaps to stabilise funding costs – a standard infrastructure practice.
On paper, the hedge performed exactly as intended.
In practice, collateral and documentation mechanics embedded in the CSA caused liquidity to become path-dependent under rising rates, constraining capital deployment and refinancing optionality despite unchanged asset performance.
The issue was not whether the hedge worked.
It was whether collateral behaviour remained compatible with the asset’s liquidity planning, growth objectives, and refinancing horizon.
This was a balance-sheet behaviour problem, not a market or credit view.
Why This Scenario Is Common
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CSA terms are negotiated as documentation, not capital architecture
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Collateral is treated as operational plumbing rather than deployed capital
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Independent amounts and low thresholds accumulate quietly across counterparties
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Liquidity stress testing focuses on asset cashflows, not margin dynamics
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Refinancing optionality is evaluated without modelling swap collateral paths
Nothing appears broken. Capital simply ceases to be deployable.
Why It Matters
When collateral mechanics dominate liquidity behaviour:
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Cash becomes trapped without a deterioration in credit quality
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Capex, acquisitions, and distributions are constrained unexpectedly
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Refinancing flexibility erodes despite stable asset performance
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Boards face false trade-offs between hedge integrity and growth
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Capital efficiency degrades without triggering formal risk limits
Performance does not fail. Usable capital does.
How This Is Typically Addressed
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Treating margin calls as temporary liquidity noise
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Layering short-term facilities rather than fixing structure
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Unwinding hedges and crystallising MTM to “reset” liquidity
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Accepting capital drag as the cost of being hedged
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Deferring action until refinancing forces decisions under pressure
These responses preserve optics, not control.
Primary Engagement Route
Primary Offer: Capital Efficiency Rebuild™ – Collateral, CSA, and liquidity architecture redesign – preserving hedge economics while restoring deployable capital and refinancing optionality.
Read the IC Brief → (2-page decision summary)
Full structural narrative shared selectively on request.
Illustrative scenario for discussion purposes only. Not a transaction summary or client-specific case study.