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Capital Markets

BankingCapital MarketsCOVID-19Treasury Management
March 19, 2020

Communication Is Key When Drawing on a Revolver

Get buy-in from internal and external stakeholders as you guard against a COVID-19 liquidity crunch. Every day seems to bring news of another multinational corporation drawing down some or all of a revolving credit facility to weather potential liquidity disruptions created by market reaction to the coronavirus outbreak. News reports say private equity firms like Blackstone are encouraging portfolio companies to tap credit lines. The companies recently tapping revolvers include Kraft Heinz, L Brands and Carnival. NeuGroup Insights reached out…
Antony Michels
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BankingCapital Markets
March 17, 2020

Not All Bank Fees Are Created Equal

In good times and bad, treasury teams benefit from knowing how their banks look at the world. That's one reason this chart, created by NeuGroup's Scott Flieger, is compelling. It shows which products are especially important to banks by measuring both their relative profitability and how much balance sheet impact they have. A third dimension shows which products result in predictable revenue and which are more episodic in nature. Most members found the slide "directionally accurate" and helpful in explaining why…
Ted Howard
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Capital MarketsLibor SOFR
March 12, 2020

It’s Time for Nonfinancial Corporates to Gear Up Libor-SOFR Transition Plans

Founder’s Edition, by Joseph Neu NeuGroup member calls with corporate treasury leaders reveal preparation gaps. Some NeuGroup corporate members—nonfinancial institutions—are well on track with planning to transition off Libor before the end of 2021. One company, Ford Motor, has even joined the Alternative Reference Rates Committee (ARRC), a group of private-sector participants convened by the Federal Reserve Board and the New York Fed to help identify alternatives to Libor and develop strategies to promote their use.  However, the majority of…
Antony Michels
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Capital MarketsNGIPension and Benefits
March 5, 2020

Actuarial Agony: Falling Interest Rates and the Plight of Pension Fund Managers

Private equity helps matters, but track records of outperformance don’t sway actuaries. Falling interest rates are pushing down the expected return on assets (EROA) at pension funds, an unwanted development for all managers and especially aggravating, perhaps, for those who have historically been able to outperform expectations. That was among the takeaways from a recent NeuGroup pension roundtable. Blame it on the actuaries. The pension fund manager at a major media company maintained an EROA of 7.5% over the last…
Ted Howard
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Capital MarketsLibor SOFR
March 3, 2020

Fed Official to NeuGroup Members: The Time to Start Paying Attention to Libor’s End Is Now

ARRC liaison David Bowman explains the implications of SOFR and what corporates need to do now.Corporate treasury teams that have paid little or no attention to the planned transition from Libor to SOFR, take note: That stance makes much less sense today than last year and “won’t make any sense” by the end of this year, in the view of David Bowman, the senior staff liaison from the Federal Reserve Board of Governors to the Alternative Reference Rates Committee (ARRC).…
Antony Michels
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Capital MarketsUncategorized
March 2, 2020

Hard to Let Go: Markets Slow to Move from Libor to New Benchmark

October 09, 2019 By Ted Howard Banks are still using the London Interbank Offered Rate but SOFR is slowly gaining traction. The members of NeuGroup’s Bank Treasurers’ Peer Group (BTPG) recently heard Chatham Financial discuss the switch from Libor to SOFR on their Q3 interim conference call. The big takeaway is that Libor remains firmly embedded in a lot of transactions, and even though banks understand that the tainted benchmark will disappear in the near future, the transition is inching…
Jacob Bromsey
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Capital MarketsPension and BenefitsRisk Management
February 25, 2020

No Slam Dunk for Pension Fund Managers: Selling Leverage-Averse Boards on Overlays

The popularity of overlays is increasing in the US despite concerns of executive committees. Leverage is something of a dirty word in the world of pension funds and that, perhaps, presents the biggest challenge that pension fund managers face when seeking to persuade their companies’ executive committees to use overlays that use derivatives as a fund-management tool.At a roundtable of pension fund managers arranged by the NeuGroup, one participant said his team had begun to explore how to “de-risk” the…
Antony Michels
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Capital MarketsESGUncategorized
February 25, 2020

Treasury Teams Taking to Heart the Force of the ESG Wave Barreling Across Atlantic

Discussing insurance, investing and BlackRock’s Larry Fink, NeuGroup members weigh in on ESG. The potentially dramatic and varied impact on multinationals from the environmental, social and governance (ESG) wave barreling across the Atlantic from Europe is hitting home for a growing number of US finance teams. That was among the key takeaways from comments by treasurers gathered in Dallas for NeuGroup’s first meeting of 2020. Thanks for the warning. One the most interesting revelations involved the effect of ESG on insurance. One…
Antony Michels
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Capital MarketsCompliance
February 20, 2020

Margin Bells Will Soon Toll for More Pension Funds

Pension funds need to prepare for margin rules covering the OTC derivatives they use. Corporate pension fund managers may soon have initial-margin responsibilities for the over-the-counter (OTC) derivatives they use to manage those funds, even if their parent companies are exempt. Background. Following the financial crisis, global regulators established variation and initial margin rules for OTC derivatives to provide greater transparency into counterparty risk. Those requirements first became effective in 2016 for financial firms with more than $3 trillion in…
Antony Michels
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Capital AllocationCapital Markets
January 28, 2020

Share Repurchases: Don’t Wait for the Sell-off

The case for spending all (or almost all) the cash allocated to buybacks right away. Monday’s stock market sell-off provides an opportunity to revist an insight on stock buybacks from a NeuGroup meeting last spring: A risk management expert at Deutsche Bank argued that waiting for dips is not the most effective way to repurchase shares. That’s worth considering given that many companies only buy back their stock when the price dips below what they consider its intrinsic value. Danger…
Antony Michels
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