Strategies to address the credit crunch   Antwerp addresses strategies to combat the credit crunch Summer 2008 The continuing global credit crunch loomed large over EuroFinance's sixth annual Liquidity and Cash Management for European Companies conference, held recently in Antwerp. Other key topics at the event, titled ‘The Importance of Liquidity’, included debt management, reverse factoring, hedging, SEPA, business-to-treasury (B2T), and expert cash strategies.   Triggered last August and the cause of ever-increasing volatility and widening spreads, the credit crunch has brought new emphasis on companies' liquidity and access to finance. European companies are having to manage liquidity and risk in the most challenging financial markets experienced in a generation, against a backdrop of looming recession in the vital US economy.   The value of pre-emptive action on liquidity and financing was an abiding theme across both days of the conference. The credit crunch has proved challenging for some companies that have needed to raise new capital in the less supportive environment.   Buy your own umbrella… Several presentations highlighted advice to “buy your umbrella when the sun is still shining,” as Alain Dehaze, CEO of Dutch staffing company Humares, put it.   Bas Snijders, Senior Vice President at vehicle fleet management company LeasePlan, used a similar metaphor. “Never borrow an umbrella from a bank – buy your own,” he advised.   Both speakers argued that companies benefit from putting committed credit facilities in place – even if the funds are not needed immediately. LeasePlan, for example, has a back-stop loan of EUR2 billion with 25 banks. This allows it to operate for as long as 12 months without access to wholesale financing markets.   For a single-A-rated quasi-bank seeking to create liabilities that mature later than its assets turn to cash, this strategy is clearly vital. But Mr. Snijders voiced pessimism about market access for all but the best-known and rated household name companies. “Investors are scared. I don’t see debt capital markets re-opening for single-A corporates this year.”   For this reason, he urged companies needing to go to the financing markets to take immediate action and also emphasised the value of diversified funding sources.   …& play the market right A different angle came from Humares CEO Dehaze and Jeroen Willems, Senior Relationship Manager and Consultant at ICC. Their joint presentation used Humares’ recent bank tender and refinancing to make the case that ‘It’s not the market, it’s how you play it!’.   Eight refinancings by privately-owned Dutch companies since last September on which ICC advised achieved an average 44% increase in credit facility size. Moreover, their margins were lowered by 40% on average. This is because banks “are still eager”, according to Mr. Willens and Mr. Dehaze – though they emphasised “not in every case!”.   Humares’ experience illustrates this. The company nearly doubled its facility – addressing a serious restriction that was preventing it from making acquisitions - while getting margins down to a market level, removing restrictive bank covenants and replacing an inflexible and expensive factoring structure.   Besides banks’ continuing appetite to lend to quality companies, Humares and ICC drew several conclusions. They particular emphasised the better potential of the bank market compared to the public debt market – most notably for loans of less than EUR300 million.   But within this more promising sector, companies must argue a well-reasoned case; they cannot expect increased facilities and reduced margins simply as a result of asking for them. Rather, they must be able to relate their request to risk ratings, loan capacity and strategy – and must maximise the transparency and professionalism of the tender process.