Preserving Access to Credit Lines with Better Compliance
The most important financial imperative today for many companies is keeping their credit facilities and their below-market terms. Today, banks are aggressively using even technical defaults to charge high waiver and amendment fees, increase spreads, and impose onerous new conditions. Resulting legal fees can exceed $200,000. In the worst cases, banks may put the the company into workout or cancel the credit entirely. In all cases, substantial senior management time that is needed for managing the business is instead spent negotiating with unforgiving, unsympathetic bankers.
Partially a consequence of the good old days of cheap and easy credit, many companies have limited debt compliance processes. There is often little forecasting of covenant ratios and buckets. But the real reason behind the limited processes is due to the nature of debt agreements: they are complicated and voluminous. Few companies have the time, expertise or really the desire to spend 8-10 man-days necessary to fully understand their agreements so they can set up rock-solid compliance processes for the quarterly CFO letter.
Comprehensive Web-Based Covenant Management
Debt Compliance Services LLC can quickly put you in control of your debt compliance and let you sleep at night. First, we thoroughly read your debt agreement by using open source technology to make your debt agreement(s) "intelligent" and exceptionally easy to navigate using your web browser.
We parse your debt agreement into small, logical web pages and hypertext all of the agreement’s section cross-references and defined terms. Click the underlined text and you will jump to the section text or to the term's definition with a listing of the other clauses where the term is used. We write summaries of the key provisions so that you can directly click to the information that you refer to frequently: drawdown procedures, the amortization schedule, repayment procedures, lenders’ funds commitments, reps and warranties, notices, etc. For ad hoc, our powerful search engine covers all of your debt agreement simultaneously, with contextual information, you can quickly hone in on the relevant pages you are looking for.
Second, as part of this deep analysis of the debt agreement, we develop a rigorous compliance process, identifying all compliance requirements and who within the organization are responsibile for them. This listing is used as the basis for writing web-based compliance questionnaires for accounting, HR, legal, and the operating units, using the definitions of the key terms as used in the debt agreement. As web questionnaires, you can track progress by the respondents in real time before they are due -- and quickly see where there are potential compliance issues. The questionnaires are summarized by compliance requirement showing this quarter's exceptions as well as last quarter's so that you are sure all compliance issues have been considered. We develop a spreadsheet model to produce actual and forecast financial covenant ratios. It's then Treasury's job to analyze the questionnaire report and the ratio calculations for Treasury's report to the CFO supporting the quarterly compliance certificate.
You have an easy-to-follow, comprehensive compliance process with the debt text, key provision summaries, and a directory of relevant people all contained and easily accessible on one server. Your respondents will appreciate the ease of use in filling out a web questionnaire, a web questionnaire that effectively educates them on potential compliance issues that they may impact in their business operations. You've minimized the risk of technical defaults and you are pro-actively forecasting ratios for potential covenant breeches when there is still time to do something about them.
You've eliminated the drudgery of flipping through 150 pieces of paper to find the answers to your debt questions. Being forced to spend time double checking everything to make sure that you have not missed an important section. Instead, you can easily and dynamically research your debt agreement, you can finish in less than half the time, and you can be confident that you have read all of the relevant sections. Believe it or not, researching your debt agreement almost becomes enjoyable.
About Debt Compliance Services
Debt Compliance Services LLC is a 50:50 partnership between Greenwich Treasury Advisors LLC and Corporate Finance Solutions, LLC.