Cash & Liquidity Management

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Financing the Business In this interview, the fourth in the series, we continue our exploration of AkzoNobel’s treasury transformation project spearheaded by Group Treasurer Peter van Rood. This month’s edition sees Peter building on some of the financing experiences he shared with TMI during the second interview, including AkzoNobel’s approach to both internal and external financing, featuring Peter together with Brune Singh and Harry Blok, Director of External Markets and Director of Corporate Finance respectively.

Financing the Business

Interview #4 with Peter van Rood, Group Treasurer, Brune Singh, Director External Markets and Harry Blok, Director Corporate Finance, AkzoNobel

In this interview, the fourth in the series, we continue our exploration of AkzoNobel’s treasury transformation project, spearheaded by Group Treasurer Peter van Rood. In this edition, we build on some of the financing experiences that Peter shared during the second interview, including AkzoNobel’s approach to both internal and external financing, featuring Peter together with Brune Singh and Harry Blok, Director of External Markets and Director of Corporate Finance respectively.

How was your financing organised when you embarked on your treasury transformation project in 2007?

AkzoNobel manages three types of financing: intragroup loans (debt/equity), bank lines and capital funding. In 2007, the various funding components of the business were far less integrated than they are today. External funding had been remote from treasury, resulting in a process disconnect, and reflecting too the fact that that treasury’s role was predominantly operational at that stage. Since then, we have aimed to make our financing strategy and execution more coherent. From the point of view of internal financing, we were focused primarily on the execution of loan documentation, with a predominantly reactive approach to intra-group funding.

As we discussed in the first interview in this series, one of the key elements of our treasury transformation was to expand the strategic focus of treasury as well as to optimise its operational efficiency. Therefore, as part of our treasury vision, we established a funding objective to secure sufficient financing for the business at the lowest possible cost. One element of this was to position our capital structure to support our strategic activities. 

As part of our treasury vision, we established a funding objective to secure sufficient financing for the business at the lowest possible cost.

How would you describe your capital funding objectives today?

Our capital funding objective is quite simple: ‘to ensure adequate financing of the businesses and their legal entities against lowest possible cost for the group’. Two years ago, market access was a far more significant issue than it is today, not only for long-term financing but our financial flexibility was also limited by constraints in the commercial paper market. During that period our focus was on refinancing our maturing debt, at the peak of the market crisis; today, the emphasis has shifted to protecting our capital structure in a heightened risk environment whilst enhancing our funding efficiency -  a relative shift within the execution of our objective from securing funds to efficiency of funding. Following the crisis, we were expecting strong market volatility to continue for some time. To mitigate this, we have increasingly sought more creative ways of sourcing finance to alleviate concerns about constrained market access in the future. As it turned out, we have seen the market environment recover more quickly than we expected. This in turn triggered us to become proactive in refinancing our debt, looking for favourable opportunities before maturity. It included us seeking other windows for accessing capital beyond our traditional EUR investor base, so we are now considering public markets in the United States, and reviewing alternative capital markets such as private placements.

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