Prior to the start of the credit crisis in 2007 treasurers were being offered access to bank funding at very attractive rates and on borrower friendly terms. Many took advantage of this by signing up credit facilities for 3 to 7 years. Bond rates and credit margins were low so that significant volumes of new issues took place with some companies even pre-funding their cash expenditure needs to the extent of having cash to deposit. It is for just these reasons that we are 15 months into the crisis and generally speaking non financial companies have not run out of cash.

However with the crisis continuing and deepening there will come a time when the arrangements made by prudent treasurers begin to expire and need replacing. Conditions in the banking market will not be easy. Professional treasurers will be anticipating this and already taking steps to conserve cash, perhaps through better working capital management, perhaps through rescheduling capital expenditure or in extremis looking at disposal possibilities. On the funding side the banking market will be much reduced in size in the years ahead and for that reason alternative sources are being explored from capital markets around the globe or by private placement type transactions with insurance companies, fund managers, pension managers and other investors.

Treasurers do need to plan for an uncertian future and in May 2008 the ACT issued a briefing “Contingency planning for a downturn in the economy: a treasurer’s checklist”

Martin O’Donovan, Assistant Director - Policy and Technical, The Association of Corporate Treasurers