Stephen Finn, treasurer of supermarket group Asda, which raised £1.75bn of senior secured notes in May, said he decided to strike early ahead of a 2026 maturity, citing geopolitical concerns as an incentive. In a session on access to financing at the ACT Annual Conference, Finn said 2023 deals by companies including Iceland and Puregym suggested “there was life in the BB/B space” from the middle of last year, indicating an opportune moment could be around the corner. “We invited in key investors and got them used to our credit story,” he added.
“With preparation that was put in place last year, we were able to take advantage of the yield curve,” said Finn, referencing the £300bn of investment grades in the first quarter he said was the biggest Q1 figure for 10 years.
He added that Asda, sold by Walmart to private equity owners three years ago, also tapped the private funding market – which, although slightly more expensive when combined with a property transaction, meant the average cost of capital was “what we were looking for”.
Don’t underestimate the pre work that you’ve got to do to get people on side
Jono Slade, group treasurer of pharma giant AstraZeneca, said that in order to move quickly it is essential to do the groundwork in advance. “Why would a bank, bond holder or a private investor rock up tomorrow and give you a large sum of money?" he asked. "You’ve got to get them comfortable with your credit position and that can take a long time. Don’t underestimate the pre work that you’ve got to do to get people on side.”
Their words were reflected by Paul Watters, head of European credit research at rating agency S&P, who said he was seeing treasurers taking 12 to 18 months to prepare for a refinancing.
These insights followed an earlier session, supported by HSBC, that examined the effects of new banking regulation – the finalisation of Basel III – on corporate funding.
The panel, which included Edward Coxhead, Basel 3.1 optimisation director at HSBC, and Christopher Blake, head of treasury at Unity Trust Bank, agreed that it was vitally important for treasurers to engage closely with banks.
Blake, who is also education director of the UK Asset & Liability Management Association (UKALMA), said the impact of the changes is going to be a lower return on capital for banks, which may limit capacity to lend. He said treasurers need shop around to some extent “as some banks are going to be affected differently to others, some products are going to be affected more than others, positively and negatively”.
Despite the new regime, banks might be able to deliver products at a lower cost if they can undertake a sufficient amount of modelling. “But they need more data to do so,” he said.
On expected timings for the new regime, another panellist Liam Girvan, an associate director at consultants Deloitte, said a UK final package of rules will be published soon. He said in Europe a ‘very near final’ set of rules has been published but not adopted into law yet.
“There’s quite a bit of difference formed between the UK and the EU implementation of the standard,” he added.
Lawrie Holmes is a freelance business and finance journalist
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