As many treasury and finance professionals will attest, organizing covenants by the legal categories of affirmative, negative, financial and nonfinancial is not very helpful. A better approach is to classify covenants by lender objective and risk. Using lender...read more
We find that Treasuries justify weak practices because they assume that the default risk is small and they trivialize the consequences, thinking only that their friendly lenders would be forgiving of any technical default. These assumptions could cost Treasurers and...read more
Debt Compliance is difficult but necessary The most critical enterprise risk for many companies is ensuring that the company maintains full access to the funds required for daily business needs, investment and dividends. Other enterprise risks can cripple a company,...read more
A primary treasury objective is to maintain and maximize access to the capital and debt markets at the lowest cost – which means consents before the fact rather than waivers after the fact. And since “stuff happens,” treasury needs to pro-actively talk to the lenders about current problems, issues, or potential events that might affect access to those markets.read more
Did you know many CFOs sign the quarterly certificate without a process that confirms and documents the compliance with all of the agreements’ covenants? Add to that, most companies have difficulties accurately understanding and interpreting their agreements in the first place.read more
Global corporate defaults reached 104 in 2016 – the fastest pace of defaults since the financial crisis in 2009. CNBC says that S&P expects the U.S. corporate trailing-12-month speculative-grade default rate to rise to 5.1 percent by September 2017.read more
Debt compliance risk may be the most overlooked enterprise liability a company faces. It’s rarely mentioned in any enterprise risk list, yet, a covenant violation can shut down a company, destroy its reputation, and crater its market cap.read more
Did you know many CFOs sign the quarterly certificate without a process that confirms and documents the compliance with all of the agreements’ covenants? It’s true. And given the high probability of a covenant violation for less than investment grade companies, that’s scary since a default can devastate a company and ruin lives.read more
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