Capital MarketsRisk ManagementTax

Buzzer Beater: A Treasurer’s Last-Second Debt Deal Scores Big Savings

By February 9, 2021No Comments

One member cut his company’s tax bill by beating the clock to complete a debt refinancing.  

As one NeuGroup member’s fiscal year began to draw to a close, he saw an opportunity to save his company millions of dollars in taxes by completing a debt refinancing deal—but he had to race the clock get it done before the calendar changed.

  • Because of the pandemic’s impact, the company needed to save money, so it was critical that the debt deal go through in 2020.

Roller coaster. At the start of the year, the member’s company wanted to reduce its relatively high leverage ratio through a refinancing. The pandemic delayed the deal by freezing the debt markets.

  • The eventual thaw created a renewed capacity to get deals done and convinced the company to go through with its transaction “to get the risk off the table,” he said.
  • The member’s deal was an amend-and-exchange refinancing of a high-yield bond, which he said was economically favorable as “high yield markets are very hot right now.”

Dramatic ending. The member said the refinancing took considerable time to prepare and was “not easy” to do under tight deadline pressure. Executing the deal came down to the last day of the fiscal year, creating a bit of drama.

  • The close meeting started at 5:30 a.m. for the member. At the last minute, a lawyer had an issue with an area in credit agreements, and his team had to scramble.

After applying pressure and some back-and-forth with the lawyers throughout the day, the deal was able to get out the door with 90 seconds to spare before the end of the fiscal year. “I’ve never experienced such a harrowing close meeting,” the treasurer said.

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Justin Jones

Author Justin Jones

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