Understanding debt and capital markets pre and post COVID-19: A guide for CFOs and treasury teams - Financial Services blog | Deloitte Australia has been saved
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For private and smaller ASX listed companies, accessing capital can be a challenge at any time but the COVID-19 pandemic has also imposed liquidity and funding constraints on some borrowers, which in turn has put a spotlight on companies from their auditors.
The focus for most CFOs and treasury teams should now be pre-empting board talk or concerns on their own capital management plans and whether there is a need to reset and resize the company’s capital mix and borrowing platform.
Increasingly CFOs and treasury teams are engaging an independent debt advisor, rather than just relying on insights and ideas from their existing lender. Considering debt and capital diversification options provides clear objectivity to board discussions on the what, when and why of debt and capital markets options open and available to them.
The global and local debt and capital markets chart below gives you an idea of the typical risks versus returns required by the bank and non-bank lenders across the various debt and capital markets for private and public companies.
The benefits of taking a deep dive
Having an understanding of the funding required now or in the future to finance a debt refinancing, capex, equipment, debtors, inventory, acquisitions or off-balance sheet working capital can give CFOs and treasury teams a vital deep dive analysis and edge when being called upon by the CEO or individual board members.
With an independently prepared external report, CFOs and treasury teams have an ’extra voice’ when presenting capital management plans to the board or to their auditors.
A detailed understanding of the various credit metrics requirements, peer scenario analysis, and key funding markets and lenders as well as the key characteristics can provide companies the rigor required to create the foundations for establishing the right debt and capital mix.
Key themes borrowers are seeing from lenders
After an initial wave of borrower triaging by lenders, CFOs and treasury teams are witnessing first-hand that existing lenders are turning their attention to a borrower’s credit metrics, facility structure, funding and liquidity diversification and pricing. The key themes we have seen firsthand during pre and post COVID period include:
Companies are acknowledging that maintaining strong relationships with existing capital providers is crucial as well as pursuing other traditional credit providers with the need to consider alternative funding and liquidity and market sources.
Increasingly, we’re seeing CFOs and treasury teams engaging independent debt advisory firms to do an analysis and create a thorough contingency plan on potential debt and capital funding and liquidity alternatives and the value of these reports to boards and shareholders and auditors are proving invaluable.
Paul is a Partner in Financial Advisory and leads the independent debt advisory practice. The team’s focus is on providing local and global debt financing solutions in regards to debt refinancing, acquisition funding and other forms of capital initiatives to both private and public clients. Paul has more than 30 years of experience in banking, capital markets, advisory and treasury payments, including expertise in global markets, investment banking, corporate finance, private equity, M&A and treasury and risk management practices. Paul has worked with many major local and global banking and advisory firms in the U.S, Asia and Australia, and has built an enviable reputation with Board Directors and Senior Management from a wide range of companies and debt investors. Paul’s extensive strategic expertise and track record provides value for all types of clients in a wide range of industry sectors who are seeking a trusted debt adviser to assist with optimising the structure of their debt financing.