Treasurers who plan to embark on a US private placement (USPP) programme need to have clear objectives as to what they want to achieve and hold on to those objectives throughout the process.
This was the advice of BBC group treasurer Stephen Wheatcroft, who spoke at the ACT’s annual Corporate Funding Conference on 10 October.
Wheatcroft told delegates that the BBC had opted to raise £170m on the USPP market in June 2013 because it was a good way for the broadcaster to diversify its funding sources, extend the maturity profile of its financing arrangements and lock into low borrowing costs while interest rates are at rock bottom.
The fact that the USPP is a private market suited the BBC since it meant the organisation did not have to secure a credit rating. The USPP was also a buoyant market with an appetite for strong credits. “It was a market that was ready for tapping,” Wheatcroft explained.
Investor demand for the BBC’s USPP bond issue was so great that the deal was five times oversubscribed. It was marketed to 18 investors, with eight of those putting up money. “We fully funded the transaction with healthy over-subscription, but limited marketing,” said Wheatcroft.
The placement had a seven-year term with a US dollar interest rate of 2.71% and a sterling interest rate of 2.36%. It was used to refinance existing debt within the BBC’s commercial business.
Sally Percy is editor of The Treasurer