Can you please introduce yourself?
I am the Group Treasurer at GasLog – one of the largest non-state shippers of LNG in the world. We also have an interest in our master limited partnership GasLog Partners.
The theme of the ACT Annual Conference 2017 is opportunity from uncertainty. What do you think is causing uncertainty for treasurers today?
I have four factors on this one. First would be geopolitical risk, for example the first round of the French elections coming up on 23 April, as well as a number of other European elections including the German and now UK general elections. Second, I think protectionist sentiment tendencies are remaining quite strong, if you consider what happened with Brexit, as well as the success of Mr. Trump’s campaign, particularly in the upper Midwest of the United States. Third, I think we will see a rise in interest rates, which might not prove to be a hugely aggressive rise, but in my opinion it is steadily increasing. Finally, the impact of regulatory changes on the cost of funding, so-called ‘BASEL IV’ will make bank lending more expensive, and perhaps scarcer as well.
…and how about opportunity? How do you think the corporate funding landscape has been redefined?
I think those two questions are bound together. To some extent opportunities for treasurers are closely correlated to preserving optionality, by taking advantage of diversification of available funding sources. Having alternatives is essential. For example, we might see growing interest from Chinese leasing institutions, and/or mortgage-backed lenders. Another option, if you are willing to get a private rating, might be a private placement. Looking to our floating storage and regasification unit (FSRU) business, here it is typical to encounter a degree of sovereign risk, and I think joint ventures and other types of partnerships offer the ability to mitigate these risks. So, I think this proliferation of funding sources does represent an opportunity, and I think with the aforementioned likely increases in the cost of bank funding, treasurers need to make sure they have a varied range of funding alternatives.
What is your preferred source of funding?
Secured mortgage debt will continue to be a primary source of funding. Having said that, we have made a considerable effort already to diversify our funding sources. For instance, we have issued debt in the Norwegian bond market and in the United States unrated high yield market; we have also issued retail preferred equity, and we of course have issued common units out of our MLP, the aforementioned GasLog Partners. So, I think we have already tapped into several funding sources, and when a company grows and matures it may look to shift its funding sources and change the existing mix of funding. Over time we might use a smaller percentage of mortgage debt, although I fully expect it to remain the largest share in absolute terms. I think we will seek to diversify our sources of funding further as our business continues to grow. The current environment forces a treasurer to refine the ability to move with the market and adapt to its volatility, and the best way to deal with an uncertain future is to have multiple tools at your disposal.
What do you think treasurer’s key concerns will be this time next year?
In my opinion, it firstly depends on how the issues we have talked about pan out. How will geopolitical risk manifest itself? I also think there is growing interest in demographic-based challenges, as people have started to think a lot more about the implications arising from the so-called ‘old v young divide’ and how it might impact tax policies, pension funds, government policy on interest rates and the like. Furthermore, this time next year people will start to think about the midterm US elections which will be held in November 2018, and given the polarised nature of the current political setting, those elections will draw a lot of attention and could have a substantial impact on the global financial landscape.
As a previous attendee, what are you looking forward to most about the ACT’s two-day flagship conference?
For me it is an opportunity to discover how my respected peers are coping with the issues and challenges we have discussed here, and if I am completely honest a couple of pints of beer with my colleagues would be great too.
Rick Martin, Group Treasurer, GasLog
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