Background
The Policy and Technical team continues to speak with a number of treasurers to understand what issues they are facing and in what areas the ACT can help. We are also talking with the main banks to understand how they are responding to the COVID-19 crisis. At the same time, we have held a number of conversations with HM Treasury, the Bank of England, the CBI, the City of London and UK Finance. Through these forums we have been able to ensure that the views of the treasury community are heard by policymakers through a number of different channels.
A list of useful material from the ACT, the Regulators, the Government and Others can be accessed from the ACT Knowledge Hub.
General overview
After a week of focusing on other sectors, the Chancellor made a number of announcements of direct interest to treasurers. Changes to the already announced Coronavirus Large Business Interruption Loan Scheme (CLBILS) include:
- Increasing the turnover threshold for the from £45m to £500m
- Firms with a turnover of more than £45 million will now be able to apply for up to £25 million of finance
- Firms with a turnover of £250 million will be able to apply for up to £50 million of finance
It seems that many treasurers have moved beyond the initial shock as interim processes and activities start to take hold and they prepare for their second month end during these exceptional circumstances. As they begin to look forward, many are starting to consider medium term implications including impacts on going concern, exceptional items and hedging strategies. They are also looking at the implications as some or all of their business units go into hibernation. We are also hearing of boards being very mindful of how they may be judged once the crisis is over.
Further afield, we hear from ICMA of record bond issuance which suggests that for firms with strong balance sheets, it is still possible to raise debt.
In the Middle East, we heard that one of the implications of working from home was that many organisations were having to move away from a reluctance by senior management for wet signatures on payment activities. One of the longer-term consequences of the crisis is that firms may move away permanently from paper-based activities, opening up more straight through processing and reducing operational risks.
We are starting to hear from firms that have been able to access the CCFF programme. If you’d like to share your experiences, please drop an email to technical@treasurers.org.
Latest feedback from Treasurers
Banking:
- UK and European banks continue to be very supportive. Some US and Far Eastern banks felt to be under pressure to reduce lending – there seems to be a return to the nationalism that was seen during the Global Financial Crisis.
- Banks are anticipating waivers being requested on existing facilities but will expect to charge a fee and may not agree to a large number of waivers. The time period involved for a waiver seems to vary with some extending through to mid- 2021. Banks in general do not want to see companies default and early and honest communication is always recommended.
Cash forecasting / modelling
- Cash forecasting beginning to settle down though some treasurers continuing to struggle with the quality of data sources
- Cash forecasting is becoming more complex to consolidate as firms increase the scope and detail of the forecasts. We’ve heard of:
- Some firms building 18-month cash forecasts by week; and
- Building consolidated 13-week forecasts from 86 operating companies
- It will take time to understand how and when some of the government schemes will start to pay out (e.g., furloughing compensation payments, any backlogs, etc.)
Access to government schemes
- The number of successful applications to all of the government schemes remains relatively low. Part of this is the time it takes to complete the necessary documentation and also a number of applications have failed key criteria (such as minimum drawings).
- Some of the larger companies with access to a variety of funding channels are ignoring the Bank of England CCFF programme.
Capital markets
- The markets remain open to large companies with strong balance sheets. However rates seem to have increased with one quoting 7-year bonds rising from 0.5% pre-crisis to 2%.
Quotes we have heard from treasurers include:
- Never been busier in my whole life
- We’ll be living with this for years to come
- I created a new commercial paper programme in 1 week
- It’s been a big personal challenge, combined with changing business processes and new commercial risks – all at the same time
- We’ve been lucky as we refinanced last year and completed year end before the crisis occurred
Update from the UK regulators
- The UK government announced Thursday it would not ask the EU to extend the Brexit transition period nor would it approve any such request made by the EU
- On Friday (17/4), the Financial Conduct Authority (FCA) announced a package of measures to support consumers facing payment difficulties in motor finance and high-cost credit agreements due to COVID-19. This includes a three-month pay freeze for customers facing temporary difficulties meeting motor finance payments due to COVID-19, a 1-month payment interest-free payment freeze for high-cost short term credit and a 3-month payment freeze for rent-to-own, buy-now-pay-later and pawnbroking agreements
Views from across the world
As a member of the International Group of Treasury Associations, and the European Association of Corporate Treasurers and working with our colleagues in the US National Association of Corporate Treasurers we are keeping an eye on developments overseas.
Items that caught our eye include:
- ESMA has issued a Q&A to provide guidance to issuers on the application of the ESMA Guidelines on Alternative Performance Measures (APM Guidelines) in light of the COVID-19 crisis. The guidance asks issuers to not include COVID-19 impacts in their APM or modify past APMs in light of COVID-19, but to instead include an overview of the pandemic’s impact on their operations and performance in ad-hoc disclosures such as management reports (also factoring in any mitigating measures the issuer may be taking to lessen the impact of COVID-19 on their operations as well as how the pandemic could affect some of the data used to determine APMs).
- French Finance Minister has asked all large real estate companies to cancel 3 months of rents for small enterprises (e.g. shops and restaurants) impacted by the crisis. He also announced that companies will be able to give a tax-free bonus to their employees if they can afford to do so.
ACT Liquidity Survey
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Take the survey.
Engaging with the treasury community
Thank you to those who completed our survey on initial responses to the COVID-19 crisis. We are analysing the results and will share these with you shortly.
We welcome conversations with our members on:
- How you’re dealing with the crisis
- What you’d like us to raise with the various bodies we are in regular contact with
- How the ACT can support you during this challenging time.
Send an email to technical@treasurers.org and either James Winterton, Naresh Aggarwal or Sarah Boyce will be in touch with you.
If you have found any resources which you feel we should include, please email us with details.
Naresh