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Debt & Capital Advisory
Debt & Capital Advisory
December 2017
Introduction to PwC Debt & Capital Advisory
1
PwC
December 2017
PwC Debt & Capital Advisory is a team of specialist providing independent financial advisory services to clients in debt financing or capital raising
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Debt & Capital Advisory
1 PwC Debt & Capital Advisory
Carl-Wilhelm LevertDirector - Head of Debt & Capital AdvisoryStockholm
Christoffer AdrianSenior Manager – Debt & Capital AdvisoryStockholm
Christer BoisDirector – Debt & Capital AdvisoryStockholm
Henrik BorgfeldtAssociate – Debt & Capital AdvisoryStockholm
Daniel JohanssonSenior Manager – Debt & Capital AdvisoryStockholm
Assist in competitive capital raising
process
Deal structuring
Investment presentation
Support in dialogue with debt and
capital markets
Quick process to market
Competitive through wide range of
financing sources
PwC
PwC
December 2017
Borrowers may face financing situations such as…
1 PwC Debt & Capital Advisory
Debt & Capital Advisory
4
Expansioncapital
Buyouts
RefinancingAsset
financing
Recap-italization
Procurementof financing
Acquisitionfinancing
Cash out
Financing situations
Cash out
You want to recapitalize in order to pay out dividends. Additional proceeds raised through a
debt raising process will be paid out to shareholders
Buy outs
You are aiming to buy out one or more owners in a take-private transaction or to gain further control and ease decision making processes in
the company
Expansion capital
You have growth plans that for example include expansion or restructuring of operations, product development or entering a new market
Acquisition financing
You are aiming to acquire a business and need additional capital to meet your acquisition aspiration. The acquisition can be new or a follow on acquisition
Refinancing
You want to replace an existing debt obligation and attain a change in terms
Recapitalization
You want to change the company’s capital structure. The aim can for example be to stabilize or implement an exit strategy
Asset financing
You are aiming to finance large capital expenditure and seeking to obtain best
possible terms and conditions on asset-backed financing
Procurement of financing
You are running a competitive financing process with various lenders and need support to manage
process, maintain dialogue with financiers and compare and analyse offers
PwC
December 2017
Questions we regularly hear from our clients and can help with
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Debt & Capital Advisory
1 PwC Debt & Capital Advisory
I keep reading about alternative lenders and funds - who are they, what do they do and how do I reach them?
My long-term relationship banks have hit their exposure limits - who should I go to now?
What is the most efficient way to fund growth in my business?I'm running close to
covenants and my lenders are making noises - what's my best course of action?
I've always sourced financing from the banks. Is it time to access the bond markets?
What is the best way of returning capital to shareholders?
Would a credit rating help me access cheaper funding? How do I go about this?
Should we fix interest at current rates?
How do I know that I’m getting the best deal?
How do I protect my business and best position it for future recovery?
Swedish debt & alternative credit market
2
PwC
December 2017
Development in Swedish capital markets
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Debt & Capital Advisory
2 Swedish Debt Market
04
01
02
03
• Historically the majority of Swedish non-financial corporations debt financing from bank loans – typically relationship lending
• Strong banking sector
Strong corporate lending market
• Basel III banking regulations are expected to increase the price on bank loans to corporations and to decrease the supply
• Swedish banks and financial institutions anticipate a growing demand for Swedish corporate bonds.
New regulation
• Large corporates benefitting from attractive lending and strong demand in bond markets
• Reduced bank lending to SMEs due to stricter regulation
• Funding gap
Funding gap for SMEs
• SMEs turning to new sources of financing and alternative debt financing options
• Growing direct lending market
Increased use of alternative lending
PwC
December 2017
Development in Swedish capital markets (cont.)
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Debt & Capital Advisory
2 Swedish Debt Market
Strong relationship lending market in Sweden1 Growing bond financing market2
Corporate Funding Mix - Reliance on bank loans
US EU Sweden
Low High
• Traditionally strong banking relationships/spheres of influence with designated “house banks” supplying funding at attractive terms to corporates
• Limited tradition of corporates (SMEs) seeking and obtaining credit rating
• Large Swedish multinationals have moved into the international bond markets directly
• Non-financial companies’ borrowing on the fixed-income market has increased to one-fifth of the non-financial companies loan-based funding
• Majority of funding (approximately 70%) still provided by commercial banks
Source: Swedish Central Bank, PwC analysis
817 812 768 753 741 802 796 761 801 794
685 747 821 937 1,0351,105
1,2411,159
1,223 1,26791
115196
298290
290297
372
509 538
1620
21
1818
18
30 40
6389
120117
143
164169
188
192 210
283330
7181
90
8871
78
94 70
115
136
-
500
1 000
1 500
2 000
2 500
3 000
3 500
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
bn
SE
K
Issuers on the Swedish bond market (bn SEK, 2005-2014)
Central government Mortgage institutions
Banks Municipalities & county councils
Non-financial corporates Other credit market corporates
PwC
December 2017
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Debt & Capital Advisory
2 Swedish Debt Market
Trends in the alternative credit market
01 Increased liquidity
• Credit funds and direct lenders supply liquidity back to mid-market
• Larger funds are increasingly able to operate in the upper mid-market
• Loan volumes are recovering
• Lenders are increasing their lending targets
Intensified competition
• The use of alternative lenders are increasing in Europe
• Competition increase between both lenders and debt products02
Improved
borrowing terms
03• Increased competition between lenders improve borrowing terms
and bring a range of new products to the market.
• Erosion of covenant packages
• Alternative debt products provides significantly more leverage
PwC Debt Advisory
3
PwC
December 2017
PwC Debt & Capital Advisory – can assist you in obtaining appropriate, long-term sustainable financing for your business
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Debt & Capital Advisory
3 PwC Debt Advisory
We find the best solution for you with no bias toward the product or financing parties to be used
Our independence means we provide objective and expert advice on optimal debt structures
Why PwC?
We know how to ‘frame the ask’
We have experience of presenting to lender credit committees. We know how lenders think
Our expertise and resource allows you to run your business while we arrange your financing package
We are a well resourced international team, providing us with the experience of driving a financing process and ensure we deliver the best terms, on time
We will access the relevant sector experience in our global network to address your specific transaction issues and create value for you
We consider all options available to drive the most appropriate funding options and solutions for you
We have expertise across a range of products including senior and subordinated debt loans, hybrid products, high yield bonds, private placements and real estate
We place high priority on developing sustainable financing structures that help you achieve your financing objectives within appropriate debt market parameters
We have access to a diverse investor community of over 200 global investors, which provides current market liquidity and pricing guidance
We tailor our approach to the financing requirements of our clients and target the right lenders for each opportunity
PwC
December 2017
PwC can assist you in every phase of the investment lifecycle
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Debt & Capital Advisory
3 PwC Debt Advisory
Inv
estm
ent
life
cycl
e
Investment
• Acquisition debt finance raising• Capital expenditure programme and
working capital finance raising• Construct financing solutions
appropriate to the business and assets being funded
• Advice through public/private bond issuance, including rating advisory
Growth
Maturity
• Solve upcoming debt maturity issues• Debt market assessment to optimise finance costs• Identify and structure alternative non-bank
sources of capital • Sell-side staple finance raising• Debt discovery exercise to confirm
market appetite and underpin price• Recapitalisation and equity release
• Options assessment, liquidity solutions and covenant renegotiation• Modelling of sustainable debt capacity in the business• Stakeholder management and facilitation of consensual solutions• Investigate alternative sources of fresh capital• Restructure debt to stabilise the business and preserve value
Negotiate commercial
loan documentation
Analyse and advise you on optimum offer
Run competitive debt process to optimise offers
Identify appropriate
lenders / investors
Identify best solution /
product
Understand financing
issues / need
~1-3 weeks ~3-6 weeks~1-2 weeks
Our typical process
Realisation Realisation
Distress/ restructure
PwC
December 2017
Helping clients to make confident debt decisions throughout the cycle
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Debt & Capital Advisory
3 PwC Debt Advisory
Lifecycle stage Your objective How PwC is able to support
Distress/ Restructure
“How do I protect my business and best position it for future recovery?”
• Sustainable debt capacity and options analysis, including covenant renegotiation
• Stakeholder management and facilitation of consensual solutions
• Investigate alternative sources of new capital
• Restructure debt to stabilise the business and preserve value
“What is the most efficient way to fund growth in my business?”
Growth/Investment
• Deliver a competitive financing process to get the best deal for you
• Raise finance for bolt-on or transformational acquisitions
• Raise capital expenditure or working capital facilities
• Leveraged buyout financing for financial sponsors
Maturity“How do I know that I’m getting the best deal?”
• Solve upcoming debt maturity issues
• Optimise finance costs
• Identify and structure alternative non-bank sources of capital
• Advise through public/private bond issuance and credit ratings process
Realisation“What is the best way of returning capital to shareholders?”
• Optimise working capital, operating costs and EBITDA ready for sale
• Return of capital to shareholders via dividend recapitalisations
• Implement pre-arranged ‘staple’ financing packages for potential buyers
• IPO financing packages
PwC
December 2017
Overview of financing options
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Debt & Capital Advisory
3 PwC Debt Advisory
Bank loan
Large liquidity on the market
Provides confidence to other lenders
× Demands amortization for highly leveraged businesses
× Relatively high demands on the borrowers financial position
Bond/Private
placement
Lower regulatory demands on the issuer
Lower interest
Possibility of a longer maturity with fixed interest rate
Control is kept within the company
× Interest rate is dependent on the credit rating of the bond
× Low flexibility in regards to interest payments
Preferred stock
Has no maturity
Classified as equity
No voting rights contrary to common stock
Can be bought back to a pre-determined offer
× Dividend is made with taxed capital
× The company can not cancel dividends, unless it is also cancelled for common stock, and doing so entails a fee
Convertible debt
Low coupon
Interest rate tax deductible
The debt “disappears” if converted
× Uncertain if convertibles are to be payed back or converted
× If converted, equity is diluted
New share issue
No interest rate payments
Classified as equity
Improves financial ratios
With a directed issue the process can be simplified and faster
× Equity is diluted
× Can give the impression that the share price is over-valued
× If a directed issue, exclusion of investors
Alternative credit market (mezzanine/unitranche)
Can lend to businesses not suited for bank loan
Offers a high flexibility in the design of the instrument
× Can include restrictive covenant, that also could restrict how the capital is used
× More expensive than more senior loans
PwC
December 2017
PwC has built an extensive network of financiers including…
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Debt & Capital Advisory
3 PwC Debt Advisory
Commercial banks Multilateral banks etc Bond arrangers Credit funds
PwC offers an extensive network of lenders. We maintain a close relationship with key market players enabling us to provide a competitive landscape for debt financing. By leveraging our extensive network of lenders as an independent advisor we ensure the most optimal financing solution for borrowers
PwC
December 2017
PwC Debt & Capital Advisory has an unrivalled global presence…
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PwC Debt & Capital Advisory has unrivalled global presence. Every local PwC team has unique access to local liquidity but it is the interconnectivity within the global PwC firm that makes it truly powerful when put to use for our clients
Carl-WilhelmLevert
OwenLewis
PiotrZdrojewski
SoerenKviewgaard
John Williams Ard
Burgers
Daniel Judenhahn
HervéColson
StephenOldfield
GianandreaPerco Aykut
Tasel
MatthewWilde Girish
Sahajawalla
Diego A.Martinez
AntónioRodrigues
Stephanie Hogue
ShoichiOka
MatthewSantoro
JoseBraga
This publication has been prepared for general guidance on matters of interest only, and does not
constitute professional advice. You should not act upon the information contained in this publication
without obtaining specific professional advice. No representation or warranty (express or implied) is given
as to the accuracy or completeness of the information contained in this publication, and, to the extent
permitted by law, Öhrlings PricewaterhouseCoopers AB, its members, employees and agents do not
accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else
acting, or refraining to act, in reliance on the information contained in this publication or for any decision
based on it.
© 2017 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms,
each of which is a separate legal entity. Please see http://www.pwc.com/structure for further details.
www.pwc.se/en