The Treasurer September 2007
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marketwatch TECHNICAL UPDATE (TT Sep07 p10-11)
How to get the best out of money market funds
Recent press reports about the capital loss in some money market funds have highlighted the general issues a treasurer should be looking out for when placing funds under management.
Tobacco deal sealed prior to global finance market going up in smoke (TT Sep07 p12-13)
The global credit crunch which so rocked international capital markets this summer is likely to lead to a long tail of negotiated and renegotiated deals and debt issues long into the autumn.
Ask the expoerts: Define your treasury challenges (TT Sep07 p14-15)
At the recent Talking Treasury conference in Dusseldorf in June, three treasurers from different sectors and from different locations in
Europe gave a fascinating glimpse into their differing treasury challenges.
Appreciating the euro (TT Sep07 p16-17)
Apart from the grumblings of a few politicians, most European commentators have been remarkably sanguine about the rise to new heights of the euro. But a close look at the situation shows the damage a strong euro does to the global competitiveness of the euro zone economies. A strong euro makes it hard to take advantage of the global boom, and even if it wants to there is little the European Central Bank can do about it.
Digging deep (TT Sep07 p18-20)
It must be rare for a treasurer to move from working in Brentford, west London, to living and working in Vienna. But Brendan Boucher seems to have made the switch from the delights of Kew Gardens and Brentford FC to the coffee houses and State Opera of Austria’s capital city with ease.
The Advisory Board (TT Sep07 p21)
Since its first meeting in January 2003 the ACT Advisory Board has come to play a crucial part in the ACT’s strategic thinking. Board members Paul Spencer, chairman, and Alastair Clark tell Jennifer Carruth what the advisory board aims to achieve
A nice package (TT Sep07 pp22-24)
Rexam’s €750m 60-year 6.75% hybrid was priced at euro-mid swaps plus 190 basis points. It was accompanied by a 9.9% equity placing to raise £286m that, combined, supported its BBB and Baa3 corporate rating. The group was keen to find a financial solution that worked for its shareholders by minimising dilution; was attractive from a debt holder perspective – which meant maintaining Rexam’s investment-grade ratings – and was also cost-effective when compared with other financing options. It was also vital to get comfort on the tax treatment. The key to the hybrid’s success was getting the structuring right. The process is very different from issuing a senior bond, where the terms and conditions follow a familiar path.
The treasurer is king (TT Sep07 p26-27)
Talking Treasury, the third in our thought-leadership series, was held in Dusseldorf in the summer, organised by the ACT and VDT and sponsored by JPMorgan Asset Management. Peter Williams reports on what was on the minds of Europe’s corporate treasurers.
The late, late show (TT Sep07 p28-29)
Late payments are the bane of many small and medium-sized businesses. What’s more, the problem appears to be getting worse as larger companies force their suppliers to play a waiting game.
The REIT answer for Europe (TT Sep07 p30-31)
Much of the discussion about extracting value from corporate property portfolios by hiving properties off into a UK real estate investment trust (REIT) has been purely in the domestic context, but are similar structures possible for pan-European portfolios?
No choice but the wait and see (TT Sep07 p32-33)
The banking industry has faced unprecedented change in the last few years with increased consumer action, new technology and an ever competitive marketplace. This, coupled with the relentless pace of regulatory and accounting changes in the UK, has left the sector exhausted. Basel II is one such change which has involved a major investment on the part of those institutions required to adopt it. The impact will be felt far wider as credit models used to assess the creditworthiness of obligors have been developed for the corporate and retail sectors alike. This article seeks to establish what those impacts might be.
Making an impact (TT Sep07 p34-36)
The current dislocation in the global credit markets has been characterised by the well-documented underperformance of both credit default swaps (CDS) indices and, to a lesser extent, single-name CDS. The article concentrates on credit default swaps, both singlename and indices, which make up the largest proportion of the market and are most relevant for corporate users. CDS are increasingly used by the capital market as a proxy for assessing a credit’s relative value, and therefore by banks and bond investors as an input for bond and loan pricing. Single-name CDS and CDS indices also have direct applications for corporate users as a tool for credit hedging, risk mitigation and liquidity management.
Pick your risk (TT Sep07 p37)
According to Raymond Haines, Managing Director of ABN Amro, there is a basic rule when assessing risks. At the conference’s liability-driven investment (LDI) seminar, he advised delegates that risks should be assessed in two categories: affordable (those where disappointments are not disasters) and rewarded (those with a positive outcome).
Agents for change (TT Sep07 p38-41)
Shareholder activism is a force that even the largest corporations can no longer ignore. Although critics charge activists with focusing only on short-term gain, boards must now have a contingency plan ready should they become a target.
Avoiding the traps (TT Sep07 p42-44)
It will not have escaped the attention of pension scheme sponsors that almost everyone is clamouring for higher scheme funding levels – not least trustees and the Pensions Regulator. And there are, indeed, strong incentives for funding, not least potential reductions in tax bills and the risk-based levy of the Pension Protection Fund. Yet despite these demands, strongly performing equity markets and some increases to long-term interest rates in the UK have combined to give treasurers something new to worry about – the possibility of unproductive surpluses arising in pension schemes, where there may well be no future benefit accruals to be funded and little chance of obtaining a refund. This article looks at some of the generic measures available to scheme sponsors for avoiding trapped surplus.
Invest for the future (TT Sep07 p45)
As we resume after the summer recess it is a useful time for individuals to review their situations. Employers should review their teams, and assess their development needs, succession planning, benchmarking, salary reviews for the next year, project management and the allocation of duties over the coming months. Employees, on the other hand, should review their development, areas of weakness and strength, and opportunities in their current positions (whether in treasury or across the group).
