Most treasurers will be involved in refinancing at some stage in their career. As a result of funding during the pandemic, many companies have bonds and other forms of finance maturing in the coming months. We’ve asked a senior treasurer with over 20 years of experience to provide their top tips when approaching a refinancing.
Some top considerations of financing include:
1. Make a plan. List EVERYTHING in Excel with dates and names. Identify the time-critical items (maybe the marketing materials, board approvals and legals). Create categories such as admin, advisors, approvals, analysis/proposal (of which debt type etc), budget, pricing, completion, due diligence, documentation, resulting intercompany loans, tax, lawyers, non-disclosure agreements, launch/presentation/roadshows and Q&A.
Tripwires are legion. Will your CEO and CFO be in the right place at the right time for signing; do your internal rules require formal board approval of the transaction shape before launch plus approval of the final agreement before signing (which helpfully determines the end date with a hard deadline)? Get a delegation of board authorities (both early/informal plus final/formal/drafted by the lender market specialist counsel themselves) to reduce some of the admin and need to schedule slots with senior management. Appointing lawyers can be time-consuming if you have to get a couple of quotes and your own legal team have to review the final engagement letter so starting early is a must. Let your finance / PR / ESG colleagues know that you will need information from them and include them early on.
2. Do you need debt advisors? If you are still reading this then I reckon you might. If you have not done a deal in that capital market before then also, probably yes. An experienced treasurer can do a bank deal themselves. A bond deal needs arrangers and those bankers come with big personalities to manage so you may need a hand. They are expensive – can you ask them just to help with one aspect where you feel weak, and charge a proportion of the fee?
Pricing is a key aspect where an advisor can add value. However, with experience and good lender/investor relationships you can identify the right price target yourself. Paying £100k for advisors who give the same wide price range you already knew is a waste of money and time. Your pricing point should be carefully considered. For banking deals, identify a price that will work and tell the lenders this is the guide price. Discuss that price with your boss first though – it is the turning point of the deal. However, in bond transactions, you’re dependent on your advisors’ analysis of comparable stocks and secondary market transactions – the ‘Issuer’ can’t really ‘manage’ those lenders towards a guide price.
3. If you don’t enjoy choosing your lenders/investors to approach then maybe you need a different assignment? Start with the long list of 20+ and get down to a number that will ensure pricing tension, but not so many that you have to reject parties that tick all the boxes. For a final group of seven target around ten to twelve to call up – if your credit is strong.
4. For bank deals, get your counsel to prepare your own loan documentation at the start. Don’t bother with a term sheet – it just delays and encourages hassle at the end of the process. Send the complete loan documentation out at launch and request lenders to mark up their full and final comments with their pricing.
In summary: grab control at every turn.
