IFR German Corporate Funding Roundtable 2015

IFR’s latest German Corporate Funding Roundtable, held in Frankfurt on October 15, surveyed the financing and macro landscape not just from the debt and loan capital markets sell-side perspective; senior treasury representatives from three major German-based multinationals – Bayer, Daimler and SAP – additionally offered some fascinating insights into the corporate finance and funding panorama as viewed from the client side.

The transformation of the financial sector unleashed by the dual and inter-dependent post financial crisis cycles of super-regulation and strategic recalibration is all too often viewed through the lens of the primary agents: the banks. At the end of the day, though, it’s the clients who are impacted by changes to their financiers.

It’s clear that as banks renovate their product offering; update their book of core clients and revamp their geographical footprints, clients need to be aware of what is changing, how it affects them and make concomitant changes in order to maintain service levels. As we heard during the roundtable, that means in some cases seeking additional back-up providers in certain locations or for certain products.

And for multinationals that have a global presence including in markets where local capital markets are under-developed or, for example, where inter-company transfer arrangements are proscribed; that means relying on local bank liquidity in addition to the core relationship banking group.

Relationship banking, incidentally, is very much alive and kicking. It’s an important element and clients expend a lot of time and energy on it. The good news is that clients were at pains to stress that the relationship is driven above all else by fairness, transparency and careful expectations-setting.

Clients have some sympathy for the effects of the regulatory onslaught on their banking providers, but we live in a pragmatic world. One thing is for sure: no matter how much clients and banks bemoan the not-always-clear intent of regulation and its intended or unintended consequences, there will be no moratorium on regulatory endeavour.

For all of the white noise of change, though, what is perhaps striking is that when it comes to the nitty-gritty of financing arrangements and corporate finance coverage for multinationals, little has frankly changed in the German context.

Syndicated loans continue to act as the financing backbone, both for frequent borrowers and for those who use the capital markets less for ongoing financing needs and more for event-driven activity, Old fashioned they may be but syndicated loans continue to provide core advantages so seem well set to continue being the anchor of the bank-client relationship.

But during the roundtable discussion, what we heard was that the dialogue between banks and clients is broadening as corporate treasurers gain more knowledge and sophistication around the range of options open to them and hone in on the costs of financing and optimise access to the low funding costs available via, inter alia, maintaining or initiating dialogue with discrete pools of capital across various types of lenders/investors.

From the providers’ perspective, the key word is pushing complementarity and solutions; not products. And let’s be clear: while debt capital markets solutions are definitely gaining in popularity, bond investors still like to see stable funding arrangements at the corporate level, which invariably includes bank lines.