* Treasurers comfortable seeking non-bank funding
* Banks pricing loans more competitively
* Securitisation rising up treasurer's agenda
By Clare Hutchison
LONDON, May 16 Healthier financial markets have
given Britain's companies more choice in raising money, which is
reducing their reliance on bank lending and helping some to get
competitive prices when borrowing, corporate treasurers say.
Banks have historically provided around 70 percent of
funding for British companies, but after the 2007-09 financial
crisis they were forced to retreat from certain kinds of lending
to meet new rules that required them to hold more capital. That
squeezed some companies.
But financial decision makers at some of Britain's largest
companies attending the Association of Corporate Treasurers
(ACT) Annual Conference in Glasgow this week reported that they
have been able to secure funding at competitive rates from a
more diverse range of sources as financial markets recover.
"The markets look good. For us there seems to be attractive
alternative options available," said Vinod Parmar, group
treasurer at bookmaker Ladbrokes.
An ACT survey of 122 treasurers in Britain and continental
Europe showed that bank loans account for a quarter of corporate
fundraising, down from a third a year ago. Debt capital markets
are the biggest source of funding, at 36 percent.
"With the bond markets you have got various options -
wholesale, retail, convertibles - we can choose what suits best.
There seems to be healthy demand for everything," Parmar said.
With greater choice, some treasurers, particularly those at
larger or investment-grade companies, have been able to get more
competitive prices from banks offering loans. Some even reported
receiving cold calls from bankers they had never worked with
looking to provide funding.
"We hit the timing right, there was a great deal of
liquidity around and it created price tension that brought (the
price) down," said Bob Cartwright, group treasurer of waste
management group Shanks, who recently secured bank
Cartwright said he ended up using more banks than originally
intended in the process, after receiving better-than-expected
terms for their services.
As well as capital markets, companies have been exploring
other alternatives, including securitisation or asset-based
lending, which now counts for almost a fifth of the advice
treasurers give to their boards, according to the ACT survey.
The market for securitised debt shrunk after a class of the
securities based on subprime U.S. home loans collapsed in 2007,
sparking a global meltdown in markets and a banking crisis.
But it is set to make a comeback as policymakers across
Europe want to encourage it, seeing it as a useful fundraising
tool for infrastructure companies and small and medium-seized
businesses that have struggled to get bank loans.
"It's very important from the point of view of low-cost
funding and diversification. We regard it as a cheaper
alternative to the bond market," said Paul Regan, group
treasurer of packaging firm Smurfit Kappa, which has two
securitisation programmes using receivables.
Greater liquidity has also enabled some firms to provide
funding for suppliers, a process known as supply-chain
financing. EDF Energy, the UK subsidiary of EDF SA, has
such a scheme.
"The primary driver is doing the right thing," EDF Energy's
Treasury and Insurance Director Alastair Russell told Reuters.
(Reporting by Clare Hutchison; Editing by Larry King)