(Corrects title of Bank of America's Little in 8th paragraph)
* Companies transferred money from international affiliates
* Treasurers learned liquidity lessons from past crises
* Money-market funds and dealers thinly staffed this week
By Jed Horowitz
NEW YORK, Oct 31 Corporate treasurers laid in
extra cash reserves as the devastating storm Sandy approached
the U.S. East Coast, to ensure they could meet payrolls, buy
inventory and contend with other short-term needs after the
Acting on lessons learned in previous disasters, big
companies that regularly issue commercial paper to fund
themselves replenished their coffers last Friday and early
Monday after learning that bank dealers might have problems
buying and selling the debt.
"We took precautionary steps and brought cash in from our
regional treasury centers to make us liquid in the U.S. in the
event CP markets were down," said Dennis Hewitt, treasurer of
Omnicom Group, an advertising and marketing
communications company based in New York that had annual 2011
revenue of about $14 billion.
"We were told by some of our dealers on Friday and Monday
morning that both buyers and sellers would be staying home,"
Investors such as money-market funds fled from the
commercial paper market after the September 2001 attacks and
again in 2008 during the financial crisis, creating funding
issues for global companies.
This week's planning helped reduce Sandy's impact on
corporations that feared losing bank services and access to
investors as the storm reaped havoc on the Eastern Seaboard.
"We've all learned lessons that have got us to the point in
2012 where things are working pretty well," said Thomas Deas,
chairman of the National Association of Corporate Treasurers.
Robert Little, global head of short-term fixed-income
origination at Bank of America Corp, said he has heard
of only one or two companies that drew down bank lines to meet
cash needs this week. "I have not heard of any real painful
stories about not getting funded," he said. "A lot of issuers
very smartly were overfunded going into the weekend."
Bank of America was "very upfront" in warning corporate
customers late last week that funding might be difficult during
the storm because of staffing problems among traders and
investors, Little said. Bank of America put up five commercial
paper traders at a hotel near its trading desk to ensure they
would be available to service clients, he added.
Deas, who is treasurer of FMC Corp, a chemical
manufacturer with about $3.4 billion of 2011 sales, recalled
that after the 1993 World Trade Center bombing, some bankers had
trouble reaching clients from their backup facilities because
their rolodexes were left in the New York City building.
FMC, which is based in Philadelphia, does not issue
commercial paper but as a precaution put extra money into its
disbursement accounts Monday morning at Citigroup and also
succeeded in hedging its foreign exchange positions that day.
Bank employees in some cases directed FMC to deal with their
London, Singapore and Hong Kong offices, and kept some
operations open late to accommodate FMC.
"In general, we were very pleased at how things worked,"
In another lesson from 9/11, companies have been
geographically diversifying the commercial paper dealers that
buy and sell their short-term debt.
Omnicom, which needs cash this week to meet its biweekly
payroll, imported money from its treasury units in London and
Hong Kong. It also has three large bank dealers in New York and
two outside the New York metropolitan area.
"I think this speaks to the globalization of treasury over
the past few years, the globalization of the banks and the
improved technology supporting both," said Anthony Carfang, a
partner at consulting firm Treasury Strategies in Chicago.
"Geography is slowly dropping out of the equation."
The corporate cash accumulations proved to be timely.
Commercial paper markets traded thinly Monday and Tuesday, with
volume about a quarter of daily average trades.
U.S. money market funds - drained by their heaviest
redemptions this year - proved reluctant to invest. Some funds,
which were rudimentarily staffed, also demanded higher rates
this week, according to traders.
To be sure, some investors continued to access the markets
even as the storm barreled over the East Coast.
"We are a CP investor, not an issuer, and we had no
difficulties in getting rollovers," said Kevin Wilson, treasurer
of Mead Johnson Nutrition Co in Glenview, Illinois.
By Wednesday, volume in the CP was improving, though not at
a normal pace. "Many participants are being cautious until
things are fully functional," said Bank of America's Little.
(Reporting by Jed Horowitz and Richard Leong; Editing by