The treasury team at National Grid has had a busy year. The team faced an array of financing and corporate structuring projects across the group, which has one of the FTSE 100’s largest corporate balance sheets with more than £28bn of total borrowings as of the 2015/16 year end.
The main focus of the year was preparing the group for the divestment of a majority stake in its UK gas distribution networks, which meant the treasury team needed to manage a huge process with an array of complex work streams.
National Grid’s treasury team completed one of the largest M&A transactions in the UK corporate sector in 2016. Not only that, the team continued to fund ongoing business, and the board’s decision to divest National Grid’s UK gas distribution network resulted in several separate work streams led by the treasury team, which faced several challenges.
National Grid’s treasury team completed one of the largest M&A transactions in the UK corporate sector in 2016. The team also continued to fund ongoing business
It decided to pre-gear the assets for sale to 65% debt to regulatory asset value in order to achieve best value from the sale, requiring a total of £5.6bn of debt to hit the target. It achieved this by issuing £3bn of fixed-rate bonds across four tranches – marking the largest sterling transaction of all time from a corporate issuer – and a €750m, eight-year note, with associated cross-currency swaps executed to take the proceeds back to GBP.
The average cost of debt across the new £3.6bn equiv debt issuance was 2.2%. The team also had to raise significant new term debt facilities from the bank market and negotiate for other debt to be provided through a private liability management process.
The team set a number of important records and benchmarks during the process. The £3bn four-tranche transaction represents the record-largest corporate sterling bond issuance.
The National Grid treasury team was responsible for much of the unseen work, such as the credit ratings at the new business and ongoing National Grid business, organising the carve-out finances, negotiating with the pension trustees, and building and recruiting a separate treasury team. The separation required independent systems to be set up, new banking arrangements and a team of people to operate completely independently of National Grid.
“Brilliant transaction. It takes a treasury team that was very confident of its long-term survival to have been able to conceive, convince and implement such an impressive undertaking, particularly convincing management this was a prudent source of cash at a time when markets were very strongly reflecting concern of debt and liquidity,” said a nominating bank.
In a year that saw the departure of long-standing group treasurer Malcolm Cooper, the team has continued to perform to the highest standard, ensuring it was crowned this year’s UK Large Treasury Team of the Year.
“A strong team, at the top of its game, delivering complex operational and financing requirements”
The treasury team at Anglo American has been highly commended by the judges this year for its success in its liability management operation by reducing debt, interest costs and benefiting the company by $190m in total.
Faced with a bleak industry outlook, the mining company experienced downgrades from all three rating agencies, a collapse in share price and bond prices, indicating a high probability of default. Undeterred by the outlook, the Anglo American treasury team took a bold approach to convince its senior management and relationship banks of its market judgement to use the company’s remaining liquidity to buy back debt at a deep discount.
Drawing on its strong relationships cultivated over many years, the team lined up a number of relationship banks to commit substantial backstop liquidity to support such a novel transaction.
The standout transaction successfully addressed Anglo American’s capital structure and demonstrated to the market the company’s confidence with its liquidity levels.
A nominating bank said: “The success of this transaction undoubtedly underscores the skill and pragmatism of Anglo American’s treasury team to cohesively work together across all fronts to execute this transaction at such crucial timing, all within its very conservative policies and corporate cultural framework.”
The Treasurer's Deals of the Year Awards recognise the outstanding work of treasurers, both within the treasury community and the wider business world. Through them we champion the success and achievements of treasury teams that have stood out in the market over the prior 12 months. Winning an award is a great way to strengthen your organisation's and your treasury's profile, bringing peer and industry acknowledgement. Find out more here.