Debt Investor Relations (IR) is commonly an evolving feature within companies especially those going through significant growth phases. D.F. King conducted a high-level overview of common Debt IR practices from a selection of 65 public companies with a headquarters domicile in Switzerland with gross borrowings from CHF300 million and up.
About two-thirds of the examined companies had specific webpages with details of their existing bonds and other credit facilities in place and/or a debt maturity profile. This is good practice disclosure providing transparency on upcoming liquidity requirements, providing the resources for new and existing debt investors to establish/review credit lines and an avenue to describe any notable financial risk management policies.
Looking more closely at the top end, 16 out of the 20 observed names with more than CHF10 billion in gross debt had debt investor pages on their IR websites. 60% of top end Issuers made references to a Debt Issuance Programme in place. For the largest of borrowers and programmatic funders, having access to markets and speed of execution widens the opportunity set for these Issuers to raise new funding. However appreciably the ongoing maintenance costs of regular updates to these programmes can be cumbersome and this may not suit less frequent Issuers.
Meanwhile three quarters of these 20 largest borrowers also used standalone documentation for certain issuances. Stand alone documentation may be useful for Issuers that may access certain markets less frequently or issuing in more structured/subordinated formats. The economies of scale of having a programme in place inclusive of the ongoing costs to update improves in line with the frequency of issuance under the said programme.
In the middle of the pack, we looked at 29 Issuers with gross debt outstandings between CHF2 – 10 billion and found two in five of these Issuers point to a debt issuance programme, however about 83% at least use standalone documentation to issue in markets including Swiss Francs, Euros, US Dollars, Sterling and others. 62% of these companies had dedicated webpages for bond/credit investors on their IR websites.
The remaining 16 Issuers we reviewed had gross debt outstandings less than CHF2 billion. About three-quarters of these Issuers appeared to have public market bonds outstanding and are believed to largely utilise standalone documentation, predominantly for local issuance in Swiss Francs. We found 9 out of these 16 Issuers used bond/creditor specific webpages on their IR websites.
Overall, this depicts a natural progression in documentation use and creditor friendly disclosure practices on IR websites by Issuers based on overall debt quantum. On the smaller end of town, we typically expect borrowers to find sufficient capacity within the bilateral / club lending market. For these types of scenarios, it is common for the treasury professionals to manage the overall relationships with their lender(s). As a club or syndicate of lenders grows, often this is the first trigger to expand a Debt IR function, given growing lenders’ appetite for management time to discuss a raft of private side topics and the ancillary business opportunities that come with it.
Private placement markets can often be a next step in a borrower’s evolution in debt funding, for the overall funding diversification benefits, potentially access to longer tenors and/or in certain cases alternative structured solutions. As the number of lenders and types of financiers grow, its common that regular disclosures and reporting expectations grow as well. This can be in form of more detailed financial statements, obtaining an external (private) credit rating as well as outlining prudent financial, liquidity and other risk management/corporate governance frameworks in place. The diversification benefits often outweigh the additional disclosure burden especially if the company is already taking similar steps for reporting to its shareholders.
As borrowing requirements continue to grow, they can quickly then turn to the broadly syndicated bond/loan markets. In the CHF10 billion+ gross debt space, it was most common to see Issuers sport at least two external ratings from a combination of Fitch, Moody’s or S&P. For Issuers below this threshold, we found most Issuers opted for one or two external ratings and Fedafin was also a contender in addition to the international rating agencies.
Whilst we used some general thresholds such as CHF 2 billion or CHF 10 billion to describe certain subsets of Issuers (based on gross borrowings), in practice each Issuer, their specific industry segment and their outlook on future debt requirements should be the best guide to right size their Debt IR platform.
Each time an Issuer enters a new market with a debut issuance, that can be a good opportunity to review the existing Debt IR platform and consider whether there are levers available to further scale investor interest (such as investors that did not have credit limits the first time) with the ongoing (and circular) objectives to support an active secondary market and beneficial pricing/volume outcomes in subsequent issuance.
Some commonly used disclosure practices include:
- Dedicated Debt investor webpage on Company’s investor relations website
- A list of and/or debt maturity profile of the Company’s borrowings
- Listing the external credit ratings
- Notable financial policies in place
- Prospectus/Programme documentation for bond issuances
- Green/Social/Sustainability Bond Frameworks (as relevant)
- Financing structure diagrams (for more complex financing arrangements)
Pleasingly every single company website we reviewed incorporated environmental, social and governance (ESG) detail into their websites, dedicated sustainability reports or embedded in their annual reports. There is broad acceptance across the market of the importance of conveying a company’s frameworks, objectives and available metrics.
As Issuers inevitably come to refinancing their existing bonds or other credit facilities, keeping up to date records of previous investor meetings tends to become second nature, however the data can quickly outgrow emails and spreadsheets for record keeping. Use of dedicated CRM software can be useful here for keeping track of investor allocations across multiple instruments, meetings and investor feedback (especially credit limits).
Debt IR is an ongoing journey. For debut international public bond market Issuers especially, building and evolving an appropriate debt IR platform can have many benefits in scaling an Issuer’s access to markets and pricing/volume outcomes. We view a comprehensive platform including elements of disclosure, engagement, benchmarking and continuous improvement all forming part of a strong Debt IR function.
Gordon Soo
D.F. King (A part of MUFG Corporate Markets, a division of MUFG Pension & Market Services)
Senior Business Development Manager
Gordon.soo@dfkingltd.co.uk