The Institutional Money Market Funds Association (IMMFA) has hastened to reassure jittery investors after last month’s collapse of Lehman Brothers resulted in a US-domiciled fund ‘breaking the buck’ for the first time in 14 years.
The SEC is proposing to reduce the use of credit ratings throughout its rules. The US regulator is concerned that investors are placing undue reliance on credit ratings and may interpret their use in laws and regulations as an endorsement of the quality of the ratings.
FTSE 350 companies are rethinking the assumptions they typically use in valuing their pension schemes and reviewing the methods of selecting discount rates, according to consultancy and investment services group Mercer.
Despite the promised benefits of the Single Euro Payments Area (SEPA), Europe’s banks are still paying dearly for failed international payments, according to banking software supplier Misys.
The main feature of the debt markets as they try to shake off the clutches of the credit crunch appears to be the ending of cheap money, at least for now.
Fresh from the finalisation of its £9bn takeover of the Franco-Spanish tobacco giant Altadis, Imperial Tobacco raised nearly £1.2bn to deal with the debt taken on in the deal.
Saint-Gobain, the giant French building materials group, said it raised Û750m through a 2013-date bond issue managed by BNP Paribas, Calyon, JPMorgan Chase and Royal Bank of Scotland.
Despite a year that has been more volatile for financial markets than any other in recent times, pharmaceuticals giant GlaxoSmithKline has successfully wooed the investment community on several occasions.
Within days of closing his consultation on the regulation of credit rating agencies, the European commissioner for internal markets, Charlie McCreevy, has said he intends to propose a legally binding registration and external oversight regime in October, with European regulators supervising the agencies’ policies and procedures. The proposals will also cover reform of the corporate and internal governance of agencies.
Comments from Carsten Rueth (head of treasury at RWE Npower), Lesley Flowerdew (tax & treasury director at WS Atkins), Wolfgang Frontzek (manager group treasury at WILO) and Peter Radtke (head of finance and group treasurer at REWE).
Growth in the euro area has slowed sharply following a very strong start to 2008, and available indicators suggest no improvement for now. Export diversification, not only to Asia but also to Russia and Eastern Europe (see Figure 1), has helped to reduce Europe’s dependence on the US. As a result, export growth remained strong despite the slowdown of the US economy last year. But foreign order intake, especially in Germany, has been declining sharply of late. This suggests an export growth slowdown.
During a long and distinguished career in treasury, Erhard Wehlen, the group treasurer of gas and engineering group Linde, has found one recurring theme that runs through the decades. Referring to the topics discussed at the TalkingTreasury conference (see page 40), Wehlen says: “The major part of the discussion shows that treasury is a function where you have to cope with whatever the business and economic environment presents to you. And that sometimes can be a challenge.”
In the last issue of The Treasurer, we looked at what a rating means (and does not mean) and how our business model works. In this article we examine the actions that Standard & Poor’s is taking in light of events of the past 18 months.
S&P uses the same rating scale across all types of debt: structured finance, corporate and government. It provides a common language for evaluating and comparing creditworthiness across all major sectors and subsectors, and is accepted by the vast majority of market participants. Our focus is on developing, maintaining and, if necessary, adjusting ratings criteria to achieve reasonably consistent credit opinions across sectors and regions.
There has been a flurry of new deals launched over recent months in the schuldschein (German loan instrument) market, with investors in the enviable position of being able to pick and choose. The preference for German deals is clearly being asserted. However, for non-German borrowers that meet investors’ criteria for credit ratings and pricing, schuldscheine can make a useful contribution to funding diversification.
As noted in last month’s feature, harder economic times have seen a renewed focus from the main players in the markets for credit reference and credit insurance such as Dun & Bradstreet and Experian. But before the private market developed a range of insurance products catering for UK manufacturers and investors trading overseas, many companies relied on the cover offered by the Export Credits Guarantee Department (ECGD), set up by the government shortly after World War One in a bid to revive British trade and exports.
The political risk market has developed significantly since its early days in the 1960s. Unlike less specialist forms of insurance, political risk products vary from insurer to insurer, but there are two basic categories: asset-based risk and contractbased risk. The former protects a company’s investments and the latter relates primarily to its exports. Many financial institutions fuel the demand for the second type of cover.
Developments in the pensions buy-out market continue to arrive thick and fast, marking out a vibrant sector experiencing healthy growth and bucking the mood of economic gloom elsewhere. New market entrants are expected, which promises to end the era of relative stability; the wider range of products they will bring will also make the buying decision more complicated.
Treasurers should make sure they are clear on the accounting risks as well as the actual economic risks that have arisen from the current market volatility. Any large gain or loss on the income statement that wasn’t previously identified is likely to cause tension in the treasurer-CFO relationship.
After a year of the credit crunch, lenders are seeking more restrictive lending terms. Against this backdrop, the ACT has taken the opportunity to look in more detail at the Loan Market Association’s recommended form of facilities agreement for leveraged transactions.
The new ACT borrower’s guide to the LMA facilities agreement for leveraged transactions, produced for the ACT by Slaughter and May, is being published to coincide with the completion of the LMA’s own review of this agreement.
The LMA’s revised version of its recommended form of facilities agreement for leveraged transactions was released in September. It is an important document in the context of leveraged financing transactions, and along with the ACT guide, will also be relevant for financing transactions for cross-over and other non-investment grade credits and, in some respects, for all acquisition financing transactions.
With the banks themselves fighting for liquidity it is reasonable to assume that corporates will have felt the impact of the credit crisis on their liquidity risk management and corporate funding strategies. Gerry Bacon, group treasurer of Vodafone, chaired and introduced the session on this topic. Panel members included Erhard Wehlen, group treasurer of Linde, Graham Wood of the supervisory board at E.ON International Finance, and Henryk Wupperman, head of capital markets at Bayer.
Far too often, companies that have invested in a treasury management system (TMS) miss the opportunities to maximise the value they receive. Many treat their TMS as a deals database, using it to register, confirm and report money market and foreign exchange (FX) deals. The system may run partly or totally on a standalone basis, without integration into other internal systems such as enterprise resource planning and accounting or external platforms such as banks’ systems; as a result, rekeying may be necessary to transfer the information from the TMS to other systems. And as new management reporting requirements arise, companies sometimes take a quick-fix approach, and set up spreadsheets to generate this reporting. The result is a treasury department that fails to get the best value from its TMS investment, and which may be incurring unnecessary expense and risk as a consequence.
Changing jobs is a big deal. Leaving an old company for a new one always carries risk, especially if you have been happy and successful in your previous position. But many professionals, including treasurers, in the pursuit of their ideal career see the need to keep pushing themselves to find new and interesting challenges.
