Reasons to rejoice despite all the doom and gloom
It is hard to escape the overwhelming sentiment of despondency that is gripping large swathes of the economy. Starting in the financial sector, the feel-bad factor now infects virtually every sector of the global economy – retail, motor industry, IT, general manufacturing, even the public sector are all showing signs of the strain, notably through the announcement of significant job losses.
And reading this month’s What Next? by the CIPD’s John Philpott won’t brighten the mood.
This year is undoubtedly going to be painful, perhaps even more so than necessary. One treasurer whose company had just announced results which were far from disastrous witnessed the City reaction to the figures and portrayed equity analysts who seemed to be interested only in determinedly hunting for the downside.
After the business minister Baroness Vadera was roundly criticised for claiming she could see a few green shoots of recovery in response to a question in a TV interview, it is apparent that there is not a mood of prevailing optimism.
As The Treasurer has been assiduous in reporting over the last 18 months, treasurers have had a ringside seat as these unprecedented events have moved from a crisis in the financial services to a sharp slowdown in the economy.
Despite all this it must be said that reading the entries for the Deals of the Year (DOTY) and Teams of the Year (TOTY) has been a fascinating exercise in seeing what can be achieved in business and in capital markets, even in difficult times. As well as technical competence in dealing with complex financial issues – still a valuable corporate skill even if it is one taken for granted from the treasurer community – there are a wide range of other admirable qualities displayed by all of those who entered.
To do a deal in the conditions that prevailed in the capital and markets last year takes a certain amount of nerve and requires a determination on behalf of everyone involved in the process. And it is clear that teamwork – within treasury teams, the company and with other colleagues such as bankers and other professional advisers – is one of the common characteristics that denote success at any time, but particularly in this market.
DOTY and TOTY prove that even in the most testing of times there is an upside of notable achievement. Such a tale may not reflect the present sentiment but that doesn’t take away from the fact that the treasury profession has good news which deserves to be told.
PETER WILLIAMS
EDITOR
Taxation on dividends is set to be a key battleground between UK corporates and the UK government in 2009.
The ACT has announced the winners of its 2008 Deals of the Year and Treasury Teams of the Year Awards.
The Euro Debt Market Association (AMTE) has begun operating as a semi-autonomous council under the auspices of the International Capital Market Association (ICMA).
A centre to foster global regulatory co-operation for renewed efficiency of financial markets has been launched in London.
Rights issues can be a prolonged and overly complicated process. The extended timetables needed to complete some of the bank rights issues last year gave ample time for the banks’ share prices to move, creating uncertainty over the outcome. In the case of HBOS the need for a general meeting, the time to prepare a prospectus and the period for which the issue had to be open all meant that the process took 83 days.
Additional IFRS 7 disclosures on the fair value of investments in debt instruments look to be rushed into accounting standards and be effective for periods ending after 15 December 2008 even though the exposure draft was only published just before Christmas. However, the timings for the EU endorsement process are unclear at this stage.
The unemployment figure is set to rise to 2.8 million during the course of this year and peak in spring 2010. But a flexible labour market and expansionary macroeconomic policy will limit further damage, as John Philpott explains.
The agenda for 2009 as seen by two members of the ACT.
The green shoots of recovery appear to be sprouting in the bond market after the desert of the last six months of 2008, although it helps if issuers are in the classically defensive sectors such as utilities and pay in excess of what was marketable earlier in the decade.
The incoming chief executive of the ACT, Stuart Siddall, is candid about the importance of treasury within the world of finance and business. He says: “I don’t know how people who have finance director roles can deal with what happens without a really good knowledge of treasury.”
In a report of November 2008, Moody’s stated:
Islamic banks’ reputation has benefited from the current crisis … reflecting their conservative approach to business … and their focus on [the] basics of banking.
Islamic finance now has a once-in-a-generation opportunity to demonstrate its capabilities before a wider audience as the funding gap in the conventional banking sector forces borrowers across the globe to seek alternative sources of funding.
Congratulations to the winners and highly commended runners-up in this year’s Deals of the Year Awards and to the Teams of the Year.
In the 11th year of these awards, the quality of entrants continues to be of the highest standard. After a successful inauguration the Teams of the Year Awards have now been split into two categories to allow for broader participation.
Deals of the year panellist Graham Wood provides a glimpse into the judging process which produced the winners and highly commended in this year’s deals of the year.
Last year was one of unprecedented difficulties for the loan market as the fallout from the credit crunch, which first reared its head in the middle of 2007, led to a wider global financial crisis. The complete loss of confidence in the financial system ripped apart institutional and in some cases sovereign balance sheets, resulting in a series of enforced consolidations and recapitalisations across the banking sector. The capital rationing and deleveraging which subsequently followed made it very difficult to establish any sort of consistency in the loan market.
An outstanding transaction in the European loans category for deal sizes over £750m and a worthy overall winner of our Deals of the Year awards, Inbev pulled off a mega financing deal to go with a mega takeover.
Investment-grade bonds are seen as the blue riband event of the deals of the year, and this year’s winner helps to maintain that reputation. A rare bbb-corporate issue in 2008, Firstgroup’s deal took perfect advantage of a limited window of opportunity.
In the last major equity-linked transaction to make it away successfully last year, healthcare company Fresenius saw a window of opportunity in the capital markets and took it with aplomb.
The objective of this eye-catching deal was to repay £4.5bn of senior acquisition facilities and refinance the company’s assets through a sale of non-core assets, creating a stable rated debt platform for the funding of BAA’s airports.
In the UK and Continental mid-market sector, the Invensys loan is a key example of strong investor demand for an international corporate with improving credit fundamentals and significant ancillary opportunities for its bank group.
A bold financing deal was needed to accompany a bold takeover bid by the UK’s largest mutual retailer. The £1.25bn term loan facility was a worthy winner in the loans for UK larger corporates for deal size over £750m.
A small but highly flexible team has shown how a treasury can successfully juggle normal operations with a major acquisition, a huge rights issue and a large bond issue.
This versatile treasury team, already winners in the mid-market loans category, carefully finessed a series of refinancing deals, undertook a set of complicated disposals, and successfully restructured itself.
A report from the ACT regional half day Cash and Liquidity Management conference.
The UK taxes profits earned by overseas branches of UK companies but gives a credit for foreign income taxes suffered. Similarly, when a foreign subsidiary pays a dividend to its UK parent, that dividend receipt is taxable, but a credit is given for foreign withholding taxes and for corporate income taxes paid by the foreign subsidiary on the underlying income that has been used to pay the dividend. Accordingly, the UK tax system is classified as a credit system.
There is something sweet about working for Cadbury no matter how rough the markets are getting. Cadbury is a household name I am proud to work for. Every time I introduce myself to people, it makes them sigh, almost without fail, a smiley “aaah, chocolate!” before they remember to introduce themselves in return.
The prospect of facing an interviewer can fill even the most experienced candidate with dread, but sitting on the other side of the table may be just as daunting. James Crichton offers some tips to help ease the nerves of interviewers.
