Having been declined by its own bank one client in the energy sector requested assistance in raising funds of €32m for a development project. As former experienced bankers, Finalysis management reviewed the financial statements of the company, its P&L and Balance Sheet, studied the cash requirements and cash flow of the project to be funded and was able to determine that it was bankable. It also concluded that the company history and calibre of management offered high comfort for an appropriately invested Bank (noting that the client’s existing bank was not specialised in that area).
Finalysis then drew up a detailed proposal and application for the project, identified five possible banks, including two UK Banks and submitted the application to all. The three Irish banks declined but the two UK banks, which were active in that market responded positively.
While the client had been seeking the full €32m loan on day one, Finalysis was now able to structure the drawdown over the initial two years, thereby minimising prospective interest payments. Finalysis also specified the maturities of the various tranches by reference to required project liquidity, again ensuring that no overborrowed surpluses arose, with opportunity costs. The banks had offered longer maturities, but the flexibility needed by the client could be more economically achieved via revolvers and commitments.
Appropriateness of Borrowings to the project and Interest cost.
Client borrowings were matched to the project requirements and interest costs were minimised.
Currency Management and Treasury: As project sales were spread across US$, Euro and other currencies it was then possible to structure the total borrowings requirements to reflect and to match those currencies and receivables for natural hedging. (Finalysis identified a separate treasury system to monitor and manage all borrowings and to hedge naturally).
Bank Competition and Covenants Finalysis then undertook a careful examination of the three responding Banks’ term sheets , created an effective competitive position between banks and the client selected the Bank with which it was most comfortable, also negotiating away two onerous performance- based covenants.
Conclusion The client expressed high satisfaction with the final loan arrangement, adding that the Finalysis fee had been full recovered in the first month of loan drawdown!