Preserving Access to Credit Lines
The most important financial imperative for many companies is keeping their credit facilities and their below-market terms. Today, banks are aggressively using minor technical defaults, much less covenant breeches, 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.
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.
At www.debtcompliance.com or in your intranet, 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. Ad hoc searches are much more effective than ordinary Word or .pdf searches. 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.
Second, when this linking is complete, we develop a rigorous compliance process. We write quarterly compliance questionnaires for accounting, HR, legal, and other appropriate departments. The questions are linked to the agreement's source clauses, so your colleagues have the context for why the information is requested and what exactly is being asked for. We develop a spreadsheet model to produce actual and forecast financial covenant ratios. It's then Treasury's job to analyze the completed questionnaires 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. 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.
Call or email Jeff Wallace at 303-442-4433 for more information and to arrange a demo.
About Debt Compliance Services
Debt Compliance Services LLC is a 50:50 partnership between Greenwich Treasury Advisors LLC and Corporate Finance Solutions, LLC.