DACT Treasury Beurs 14 November 2014 Todays speakers Nienke van Stekelenburgh Associate Finance Jurgen van der Meer Counsel Capital Markets Hein Tonnaer Counsel ID: 536950
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Slide1
How to diversify your financing
DACT Treasury Beurs
14 November 2014Slide2
Today’s speakers
Nienke van
Stekelenburgh
(
Associate
,
Finance
)
Jurgen
van der Meer
(Counsel, Capital Markets)
Hein
Tonnaer (Counsel, Finance)
2
How to diversify your financingSlide3
Approach
Project Financing
Supply Chain Financing
Combination of financial products
Debt Capital Markets
Trends, Options and Tips in respect of selected forms of financing:
Choices & Strategy
General tips & tricks
Q&A
3
How to diversify your financingSlide4
Choices & StrategySlide5
Choices and strategy - preparation is key
5
How to diversify your financing
Impact on organisation
What matches your
funding profile
Documentation
Volume
MaturitySlide6
Where to start?
6
How to diversify your financing
Needs of the business now and in the near and (distant) future
Asset / Cash flow financing / Special purpose financing
Is your current financing flexible enough to deal with growth and can you optimize the funding needs of your business/projects?
Impact on business?Slide7
To (re)finance or not the (re)finance…that’s the question
“Fund early and fund long”
(an old saying but still true)
Todays
’ financial markets are less stable than some years ago -> but do they provide at the same time an opportunity for your business?
Consider to tap alternative markets / financiers for capital
Consider to manage your current financing with new tips & tricks
Consider to combine products to optimise your financing
7
How to diversify your financing
John Grout, Policy & Technical Director of The Association of Corporate Treasurers Slide8
Selected forms of financingSlide9
Selected forms of financingProject Finance
Ringfenced
structure
Finance based on future
cashflows
Project has higher rating than sponsor
TIP
Permitted security versus pledge of shares in SPV
Permitted guarantees versus performance bonds or sponsor guarantees
Typical pitfalls in RCF in Project Finance:
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How to diversify your financingSlide10
Selected forms of financing Supply chain finance & factoring
Instant liquidity for supplier versus extended payment terms
No issues in RCF due to non-recourse transfer of receivables.
TIP
Factoring (recourse/non-recourse)
10
How to diversify your financingSlide11
Trends & OptionsSlide12
Trends & Options
Unitranche
USPP
EUPP
Public debt
Increased attention for Alternative Products
Excess liquidity and increased appetite from banks have resulted in lower pricing
Alternative Lenders on the market
Trend for non-amortising, Term Loan B structures
Securitisation is picking up again after a break
12
How to diversify your financingSlide13
Selected forms of financing - Combine the products (I)
Bank Lending & Asset Based Lending / Club deal
Term loans: Banks and W/C Financing:
ComFin
Why would you combine and how to put these in the mix?
TIP
Structuring
Separate permitted financial indebtedness with surplus security arrangement
One combined financing arrangement – easy does it
Operational impact
Which
ComFin
House will monitor and is the business ready
Who gets to say something about what? Voting…
Bilateral versus Club Deal setting
Out of the box – lease? Why not via an ancillary in the club deal
Transferability
Think:
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How to diversify your financingSlide14
Selected forms of financing - Combine the products (II)
Super Senior RCF & Unitranche
RCF: Banks
Term debt:
Unitranche
lenders like
Alcentra
, ICG,
BlueBay
etc
Unitranche
is similar to a Term Loan B provided by a Bank
Make sure you have a market term sheet, because
Unitranche
Lenders get many requests
Think about portability of the
Unitranche
loan
Think about possibility for additional debt in the future
non-amortising (more bond like/longer tenors)
Blended senior/
mezz
pricing (Cash, PIK, Warrants)
floating rate + make whole/prepayment fees (1-3%)
Selected features:
Unitranche
is lower ranking re security proceeds
more borrower friendly/less restrictive covenant structures (incurrence
vs
maintenance)
TIP
14
How to diversify your financingSlide15
Selected forms of financing - Combine the products (III)
USPP & RCF
RCF: Banks
highly standardized (US model form) but exceptions possible
low leverage 1x -1.5x, limited option to increase (add
on’s
) to 3x
Selected features:
Make whole premium
Unsecured /
pari
passu
secured with RCF
TIP
Notes: insurance companies/pension funds (Delta Lloyd, Mutual of Omaha,
Pricoa
, Prudential, Allianz etc.)
Investors look for solid financial structure and good reputation
Roadshow
USPP
Think about portability and possibility to add new debt
Covenants correspond to those of a U.S. company with a similar financial structure (often capital maintenance, limitation debt + security)
Freely transferable
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How to diversify your financingSlide16
Selected forms of financing European Private Placements
Clifford Chance founding member of European Private Placement Association
Other founding members are: M&G, Delta Lloyd,
Robeco
, NIBC, A&O
Currently not (yet) leveraged finance
Examples in the market: long term debt provided by Delta Lloyd and working capital provided by
Rabobank
– joint security package and
intercreditor
agreement
For more info, see: www.europeanprivateplacementassociation.com
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How to diversify your financingSlide17
Selected forms of financing
Debt Capital Markets (I) selected products
Bond versus traditional bank lending
Eurobonds
Private Placements
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How to diversify your financingSlide18
Selected forms of financing
Debt Capital Markets (II) Impact Bond Issue
Road shows
Review prospectus
Determine risk factors and story line
Management time
Combination with bank financing
Rating
Organisational – price sensitive info (internal / external)
IFRS reporting
Audit committee
Change of auditor
Financial
Relationship management investor base / investor relations
Costs (prospectus supervision, listing
, agents)
Limited option to amend docs
No central agent to turn to in distress situations
18
How to diversify your financingSlide19
General Tips & TricksSlide20
General Tips & Tricks
Accordion Facilities
Extension options
Use of Obligors’ Agent clause for amendment
Think of flexibility in lending docs:
Most important : Start in time
Make use of market knowledge
of banks
, lawyers and other advisors
Tailor documentation to allow for new "third party" debt/credit facilities to be secured on a
pari
passu
basis without adjustment documentation
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How to diversify your financingSlide21
Questions?Slide22
Nienke van
Stekelenburgh
(
Associate
,
Finance
)
T: +31 20711 9654
M: +31 614850551
E:
nienke.vanstekelenburgh
@
cliffordchance.com
Contacts
22
How to diversify your financing
Jurgen
van der Meer
(Counsel,
Capital
Markets)
T: +31 20711 9340
M: +
31 621517107
E:
jurgen.vandermeer
@
cliffordchance.com
Hein
Tonnaer
(Counsel,
Finance
)
T: +31 20711 9528
M: +31 652331075
E:
hein.tonnaer
@cliffordchance.comSlide23
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