ACT guidance for uncertain times

Given the extent of uncertainty and change in the financial market we are focused on providing timely and helpful advice to our members. The most recent example of this has been over the past weekend, when we worked to respond to press reports that banks are considering invoking market disruption clauses in loan agreements. We had excellent support from Slaughter and May.

We are providing advice on our website for corporate borrowers. We are concerned about the quality of information being provided by banks for the calculation of LIBOR and EURIBOR, with the evident risk that these do not reflect the true cost of funds to banks. We look to the British Bankers’ Association and the other trade bodies to address this issue with their member banks. We will resist as best we can any attempt to trigger market disruption clauses without evidence that the banking industry has properly addressed the calculation of LIBOR and EURIBOR, with the pivotal role that these reference rates play in borrowing agreements.

Over the weekend of 13/14 September we took part in conference calls with the Bank of England’s Foreign Exchange Joint Standing Committee, focusing on the contingency arrangements that were being put in place for the anticipated bankruptcy filing by Lehman Brothers. As is so often the case the ACT finds itself as the only representative of the corporate sector when such major issues arise in the financial sector.

Martin O’Donovan’s latest blog discusses the problems now being seen in the Commercial Paper market and the linkage with the position of money market funds. Our overall advice to treasurers has remained consistent through the various stages of the credit crunch: that is to husband available facilities and ensure that adequate funding commitments are in place to allow business to continue as close as possible to usual. We particularly stress the importance of safeguarding the contractual rights companies have to draw on committed facilities, avoiding any risk of trigger events occurring that allow financial institutions to withdraw from their commitments.

Whilst all the turmoil has been developing in markets on a day by day basis we have for some time been working, with substantial support from Slaughter and May, on our new borrower’s guide to the LMA leveraged facilities agreement. This builds on the existing advice we provide on interpreting the standard LMA agreement and will be invaluable for all non-investment grade borrowers.

We continue to seek to grow our support for members and develop as a valued professional body and network for those involved. The launch of ACT Middle East will meet the strong demand in that region for a focal point for professional treasury management. The launch event of ACT Middle East is taking place in Dubai on Sunday 26 October and we look forward to seeing a number of existing local ACT members and many other professionals, all of whom we expect will be keen to participate in the educational, conference and social activities that we are planning to hold in the region.