By Hadeel Al Sayegh
DUBAI (Reuters) - Kuwait's Agility said on Tuesday it entered into a derivative transaction known as a collar trade with banks to hedge its investment in Danish transport firm DSV.
Agility said it signed multi-year funded agreements with the banks that will allow Agility to draw down within a few weeks up to 1 billion euros ($1.1 billion).
A collar is a spread strategy that involves selling a call option on an existing long stock position and buying a protective put option at the same time.
The agreements are with Morgan Stanley (NYSE:MS), Citibank, National Association and Goldman Sachs (NYSE:GS) in relation to shares representing up to 7.5 million shares of Agility's stake, it said in a bourse filing.
"Given continued market uncertainty and the significance of the DSV stake on Agility's overall value, Agility has undertaken this hedging transaction out of prudence to protect the value of the investment and shareholder value," the filing said.
Agility said the collar instrument was funded, providing the company with 1 billion euros of relatively cheap liquidity, which will help and strengthen the company's balance sheet.
Agility is DSV's second-largest shareholder, with an 8.8% stake, after the Kuwaiti firm sold its Global Integrated Logistics business to DSV in an all-share deal in 2021.
($1 = 0.9184 euros)
(This story has been corrected to change Agility's stake size to 8.8% from 8% in the last paragraph)