04 THE TREASURER MARCH 2007

marketwatch NEWS

Treasurers need to be more familiar than everwith who holds their company debt and howthis influences their actions on a daily basis,the treasurer of a well-known constructioncompany has warned.

Gary Slawther, Group Treasurer at Jarvis,speaking at an ACT conference on whytreasurers should care who is holding theirdebt, described how a complicated corporaterestructure drastically changed the attitudes ofthe company’s lenders.

Jarvis embarked on an aggressive, debt-financed growth strategy in 1994, which sawthe company move into areas such as rail,schools and medical treatment centres.

The Potters Bar rail accident in 2002 hit thecompany hard and lenders placed enhancedrestrictions on its current and future activity.

Slawther told the conference, co-sponsoredby NM Rothschild and Standard & Poor’s, that

ensuring you are aware of who holds your debtwill make all the difference when times arehard because of restrictive covenants that youmay be exposed to.

He said: “Treasurers need to make sure thatthey are familiar with all relevant documentsand that the company as a whole is keepingtrack of what they are doing. If you havethis control, then you will be in a muchstronger position.”

Stringent regulations sometimes imposed bylenders make effective reporting systems all themore valuable. Slawther said: “They need to beof very high quality. You may find you have tointroduce a culture change in a very shortspace of time and this can be difficult.”

Slawther said that keeping informed of whoyour lenders are and the way they could affectyour role as treasurer could take some time butwas well worth the effort.

Treasurers need to knowwho holds their debt

Investment and sub-investment grade corporates can have very different experiences ofcorporate debt and how who holds it can change the way they operate.

David Scriven, Group Treasurer at Yell, spoke of his experiences at the ACT’sconference on why treasurers should care who is holding their debt.

Scriven said: “In 2001Yell did a leveraged buy-out from BT and it has since beeninvolved in four large merger and acquisition bids. These triggered a refinancing and anIPO in 2003. For sub-investment grade corporates, the market is very different. Liquidityis very patchy. You can start a project and find that things will change dramaticallybefore the end, altering the outcome you expected.”

Scriven argued that his view of the market from a sub-investment grade perspectivewas very different from that of the creditors. The market is much more restrictive, sounderstanding who holds your debt makes a difference.

He said: “You have to analyse all term documents carefully and be sure that certainthings you want to do in the future are permitted. If not, you could think you are able to

embark on a project only to find that youtrip a covenant during the process.”

Scriven concluded by arguing that it didmatter to a corporate who held its debt butthat debt ownership was difficult to controlin many cases.

He said: “Do I care? I do but what can Ido about it? The ability to manage thesyndicate is down to market conditions.There are many points I need to address inmy term sheet in a short amount of time.The important thing is finishing thefinancing in time.”

The Independent Pension Trustee Group (IPTG)has launched a revised version of its code ofguidance.

The code was originally produced in 2004following discussions with the PensionsOmbudsman and the Pensions Regulator. It wasrecognised at the time that independent trusteesmust operate to the highest possible standardsof governance.

The aim of the code is to raise standards andprovide consistency across providers of trusteeservices. It covers six key areas:

n Appointment procedures; n Dealing with co-trustees and third parties;n Investment;n Risk management; n Compliance; andn Insolvency.

Roger Cobley, IPTG Committee Chairman, said: “Thisis a live document for independent pension trusteesto work by. Members of this group already have highstandards, but recognise that in the past three yearswe have had further pensions legislation and ninecodes of practice from the Pensions Regulator settingeven higher standards.

“The focus on trustees in general, andindependent trustees in particular, is greater thanever. We believe that this updated code will notonly help trustees in carrying out theirresponsibilities, but give confidence to members,plan sponsors and regulators that independenttrustees who are members of IPTG are aware ofand committed to the standards articulated in thiscode of guidance.”

IPTG issues newguidance forpension trustees

Scriven: It matters, but it’s out of your control

Yell’s different debt story

Senior treasurersalary surveyThe ACT is undertaking a targeted survey ofgroup treasurers in the FTSE 100 and FTSE 250,supported by the Curzon Partnership.

The survey will determine trends in thetreasury recruitment sector with a particular focuson the senior executive level. Those treasurersinvited to take part in the survey are asked toreturn their responses as soon as possible.

The results of the survey will appear in a lateredition of The Treasurer.

MARCH 2007 THE TREASURER 05

marketwatch NEWS

Private equity comesunder attackThe private equity market has come underscrutiny in recent weeks, with calls fortighter controls and limits on taxadvantages. Trade unions and Labour MPsargue that the disparity between thetreatment of debt and equity has led to arecent increase in takeovers, particularlyby private equity firms which can borrowmore heavily than quoted companies.

Recent high-profile private equity dealsinclude Permira’s takeover of frozen foodcompany Birds Eye, which was criticisedfor job losses and factory closures in theUK. Despite criticism and calls forchanges in regulation, some argue thatprivate equity has many plus points.

Richard Lambert, Director General ofthe CBI, said private equity houses offereda compelling model for improvingbusiness performance which has seencompanies return to the stock market infar more robust shape than when theywere previously listed.

UK sets cross-borderdeals recordLast year saw a boom in cross-borderdeals in the UK.

During 2006, there were 242 dealscompleted in the UK by foreign companies– the highest level of deals since 1999,according to accountants Grant Thornton.Foreign companies invested £75.5bn – a50% rise on 2005 and the highest levelever recorded.

With investment from the EU fallingfrom £23.9bn in 2005 to £11.3bn in 2006,and investment from the US falling from£11.7bn in 2005 to £7.2bn in 2006, the UKwas the subject of increasing takeoveractivity from businesses in developingand other developed countries.

In 2006, developing countries invested£40bn in 32 deals, up from £5.3bn in2005. Developed countries invested morethan £16bn in 46 deals, compared with£9.8bn in 58 deals the year before.

In terms of UK companies investingabroad, deal volumes in 2006 at 388 wereat their highest level since 2000 with theamount invested in 2006, £37.7bn, over15% higher than the 2005 level of£32.7bn, the highest level since the 2001figure of £41.4bn.

The foreign exchange market, pensions, andaccounting and governance were some of thetopics covered at this year’s ACT TreasuryFundamentals conference.

The annual event, which has been running formore than 10 years, is attended by a range ofprofessionals, from new recruits to the treasuryprofession to finance directors and bankers.

Conference Chairman Bob Williams said: “Theconference is aimed at people who want to startor who have just started a career in treasury. Wealso have attendees who work in other parts of abusiness and want to understand more about thetreasury function.”

This year saw attendees from higher up thebusiness ladder, with finance directors and othersenior management brushing up on the latesttreasury developments.

Williams said: “Obviously, treasury haschanged quite a lot over the years, so the

conference has adapted to include new topics,such as pensions and accounting for treasury.These areas are useful for everyone and not justbeginners.”

The conference was sponsored by Bayern LBand included presentations from Nick Mourant ofTesco and David Swann of BAT.

Fundamentals conferencegoes from strength to strength

n Philip Andrew, AMCT, formerly Controller atBritish American Tobacco Russia, has beenappointed Finance Director of Kalyx Services, adivision of Sodexho Alliance.

n James Andrews, MCT, previously PortfolioStrategist at ABN Amro Capital Management Group,has joined MBIA as Vice-President in its ProjectFinance Surveillance area.

n Patrick Clarke, International Affiliate, previouslyManager of Global Treasury Advisory Services atErnst & Young, has joined Accenture as Managerfor Finance & Performance Management.

n Robert Crowe, AMCT, has been appointedManager at Ernst & Young Australia’s Financial RiskManagement Group. Previously, he was TreasuryAnalyst at Exel.

n Stephen Ewell, MCT, previously Treasurer atShop Direct Financial Services has joined theFunding Corporation as Treasurer.

n Philip Findlay, AMCT, previously FinancialPlanning Accountant at British Energy, hasjoined Kwik-Fit Group as Group FinancialPlanning Manager.

n Raj Gandhi, MCT, has been appointed FinanceDirector at London Capital Group Holdings.Previously, he worked for Royal Dutch Shell as aBusiness Analyst in Group Reporting.

n Shahram Jahanbani, MCT, previouslySenior Manager for Finance at Halliburton KelloggBrown & Root, has joined BG Group as FinanceManager Algeria.

n Sally Marshall, AMCT, has been appointedBudget Analyst at ConocoPhillips Canada.Previously, she was Business Analyst atTesco Stores.

n Melvin Pointer, FCT, previously Chief FinancialOfficer at Hal Knowledge Solutions, has beenappointed Executive Director at Goldman SachsInternational.

n Sally Tilley, AMCT, has been appointed AssistantTreasurer at Electrocomponents. Previously, shewas Senior Treasury Manager for Operations atTI Automotive.

n David Wilson, FCT, previously Treasurer,Central, at Cable & Wireless, has joined Emap asGroup Treasurer.

MEMBERS’ DIRECTORYMembers’ contact details are updated regularly atwww.treasurers.org. Email changes to Anna Corr:acorr@treasurers.org

CAREERSFor up-to-date treasury vacancies and careers articles,log onto: www.treasurers.org/careers/index.cfm

On the move...Bob Williams: changing face of treasury.