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Capital controls: bonds and loans and the treasurer’s role in funding


Treasury departments emerge as a crucial orchestrator of capital controls and funding strategies, paving the way for companies like Adecco Group and Nouryon towards strategic growth amidst the complexities of corporate bond and loan markets.

In the ever-evolving landscape of corporate finance, the treasury’s role in capital control and funding strategies stands as a critical pillar. For organisations like the Adecco Group and Nouryon, which boast robust balance sheets and stable credit ratings, the corporate bond and loan markets offer vital channels for recapitalisation, restructuring, and refinancing efforts. Yet, the involvement of treasurers in these markets, particularly in the preparation of financial information for lenders and investors, varies significantly. 

At the 2023 International Treasury Management conference, the treasurers from Adecco and Nouryon shared how they developed capital market strategies. These strategies are designed to optimise corporate liquidity, all set against the complex backdrop of the broader corporate bond and loan markets.

Adecco Group’s treasury resilience

The Adecco Group is a cornerstone in  the human resources industry, delivering a broad spectrum of staffing solutions, from temporary roles to full-time placements on a global scale.  At the heart of the company’s financial strategy is its treasury operations, operating within a traditional framework, the treasury’s role is critical and complex, charged with managing the financial risks stemming from vast international operations. Challenges such as currency volatility and protracted project timelines necessitate a dynamic approach to treasury management. 

Adecco faced a pivotal moment when a significant acquisition resulted in the doubling of its debt portfolio to an imposing €3 billion. This development compelled the treasury to shift gears, moving from a stable financial management approach to a proactive, aggressive deleveraging strategy. 

The treasury team undertook a detailed analysis of market conditions, leveraging real-time data and predictive analytics. This approach enabled informed decisions, considering both current market scenarios and future projections. O’Caoimh highlighted the critical role of third-party tools in this process, which facilitated comprehensive data aggregation and reporting. By integrating these advanced tools, the treasury team tailored its strategies to effectively manage the heightened financial risks associated with their increased debt portfolio.

Furthermore, the treasury team emphasised systematic risk assessment and close collaboration with divisional CFOs and various business units. This approach was centred on early identification of financial exposures and the development of effective hedging strategies at an individual contract level. By coordinating efforts across different segments of the company, from sales and marketing to production and finance, they ensured timely and efficient identification, analysis, and mitigation of financial risks. This integrated strategy not only addressed immediate financial challenges but also bolstered the company’s resilience against future market fluctuations.

In the face of their evolving debt landscape, a key priority was preserving the organisation’s investment-grade rating. This rating, a crucial indicator of financial health, played a significant role in bolstering investor confidence and securing favourable borrowing conditions. To this end, the treasury adopted a dual approach: meticulously managing their debt portfolio while maintaining open and transparent communication with rating agencies. This strategy ensured that the company’s financial stability and creditworthiness were accurately represented in its credit ratings, essential for ongoing financial success.

The team also capitalised on its relationships with banks and financial institutions to monitor market trends and opportunities. Opting against hedge accounting introduced complexity, requiring a balance between accounting and economic outcomes of hedging activities. This necessitated financial expertise and a deep understanding of international accounting standards. Meanwhile, innovation was a key focus, with the adoption of advanced treasury management systems (TMS) enhancing operations from cash positioning to liquidity management. These systems became the treasury’s nerve centre, offering the agility needed to navigate market volatility and operational challenges.

Nouryon’s specialty chemicals financial alchemy

Nouryon, a global leader in the specialty chemicals industry, has established itself as a key player in diverse sectors, from consumer products, building and infrastructure to agriculture. The organisation’s involvement in manufacturing components for everyday items like shoe soles and skincare products, as well as enhancing construction materials and crucial agricultural crop protection solutions, highlights its expansive reach across numerous industries. 

The journey of Nouryon as a standalone entity, especially after its spin-off from Akzo Nobel and acquisition by Carlyle, a US private equity firm, in 2018 marked a significant transition in its financial narrative. This shift brought with it a considerable increase in debt, leading to around €7 billion in bonds and term loans on the company’s balance sheet. Maerle Wasmann, director of financial markets, treasury accounting and control at Nouryon reflects on the challenge, “This resulted in an initial net leverage to EBITDA ratio of over six times. Translating Given the strong free cash flow profile of the standalone Company, this translated into a rating of B+ for S&P and Fitch and B2 for Moody’s. Over the years Nouryon has been very successful in deleveraging the company.” 

In response to the dynamic financial landscape, Nouryon’s treasury team embarked on a path of refinancing and strategic debt management. The approach was comprehensive, focusing on managing existing debt and proactively positioning the company for upcoming market opportunities. “This year (2023 red.), we have been in the market three times to obtain additional financing and refinance existing debt,” Wasmann notes, underscoring the strategic and tactical steps taken by treasury.

Following the complexities of a leveraged financial structure post-transition to private equity ownership, Nouryon’s treasury team has continued to demonstrated a nuanced approach. They adeptly balanced the strong business profile, the financial stability with the dynamic demands of new ownership. This equilibrium was crucial in aligning Nouryon’s financial strategies with its overarching corporate goals. A key component of their strategy was maintaining a state of continual readiness for market engagement, which involved regularly updating investor presentations and documentation. This preparation was vital for Nouryon to swiftly capitalise on emerging market opportunities and pro-actively refinance its debt and essentially taking that risk off the table to ensure they continued to de-risk the company.

The treasury’s  treasury team’s open and ongoing communication with banking partners was vital for understanding capital market dynamics and structuring refinancing deals. This ability to quickly engage with the market, demonstrated by several refinancing operations, was amongst others attributed to strong banking relationships as well as, close cooperation with their shareholder and their financial markets team.

Additionally, the treasury’s  treasury team’s collaboration with legal, tax and accounting departments played a critical role in ensuring compliance and accuracy in financial reporting. This cross-departmental coordination highlighted again the treasury’s  treasury team’s strategic approach, combining diligent preparation with robust relationship management and cross-functional collaboration. “Be ready. Take the effort to prepare,” Wasmann advises, capturing the essence of Nouryon’s treasury operations, which emphasise readiness and strategic agility.

The experiences of Adecco Group and Nouryon vividly illustrate the evolving and multifaceted role of corporate treasuries in managing capital controls, bonds, and loans. Their proactive approaches, characterised by strategic debt management, meticulous market analysis, and strong cross-departmental collaborations, underscore the significance of treasuries in navigating the complexities of today’s financial landscapes.