Case Studies

Some recent case studies - Involving Restructuring Client Banking and Treasury Operations

1. A Major US multi-national

In the case of one a US multi-national with operations in 37 countries across Europe, the US and Asia, the introduction by Finalysis of cross-frontier pooling (to mop up significant pockets of liquidity across various countries) resulted in a reduction of $250,000 in the net interest charge.
The strategic use of multi currency facilities, creating natural hedging opportunities, (in place of currency  forwards ) delivered a benefit of $50,000 and the restructuring of borrowings, to provide increased working capital, made it possible for the corporate to absorb seasonal surpluses, with a direct benefit of $85,000.
Finally, the tendering of the client's banking and the renegotiation of all borrowings, added a further benefit of $700,000, delivering a total benefit, (repeating annually), of $1.09 million

2. A State Company

A review, for a major semi state company, with a policy of divisional autonomy, identified room for:

• The consolidation of all funds and of divisional cash flows
• The centralising and netting of currency management, (transactions and translation)
• The renegotiation of leasing and other trade finance arrangements
• The introduction of cash pooling, providing transparency at Group and subsidiary levels

Total benefits from this review, €250,000 annually.

3. A Construction Industry Conglomerate

The review of the treasury operations of grouped, and associated, construction companies, across a number of banks, identified substantial concurrent borrowings and surpluses, significantly uneven pricing of borrowings and of commitments and material interest rate exposures.
The benefits of tendering that group's banking and finally concentrating group banking in only two banks delivered a total benefit of €570,000, together with the removal of interest rate exposures.

4. Another Construction Company

In a study, for this client (also discussed under "Some Errors" below), reference to the company balance sheet, to client cash flow, to shareholder value and to the security already provided against borrowings, indicated that a 1% reduction in the (borrowing) margin was immediately negotiable, resulting in an annual benefit of €85,000.

5. Some Bank Errors Encountered Loan Rating

In the above study for a construction company, we identified - apart from the usual cash and currency management issues - a significant loan rating error on the part of the bank. While the bank offer letter specified a Euribor-based rate, the Finalysis review of actual rates charged against Euribor, showed that loans had, in fact, been charged at a rate referenced off the bank's internal base rate, an average error of 0.22% against the agreed rate. In respect of the overcharging of the four loans involved, over a period of some 30 months, the bank agreed a refund of €55,000. (Other borrowers of this bank were surprised to receive unsolicited refunds, from what emerged to be a national error).

6. Adjustment of Loan repayment Terms

In relation to a major retailer, it was noted that that client had agreed with its bank to accept a once a year payment on a Eur10m, 10-year loan, to replace former monthly repayments (this because of high cash flow at the beginning of the year). An examination of the bank's revised loan repayment schedule showed, however, that the bank had failed/neglected to adjust the computer schedule appropriately and was continuing to compound interest charges on a monthly basis, increasing the APR on the fixed loan from 6.22% to an effective 6.54% pa.
The bank agreed a refund of €55,000 in respect of this error, correcting also for the remainder of the loan period, thereby delivering a further forward benefit of €45,000.

7. Interest Surcharges

A study for a major corporate in the agricultural sector, (turnover + €1 billion), using Finalysis software, identified a previously undisclosed interest set- off charge. Reference to the client bank's facility letter showed that no authority for this surcharge had been included in that letter, or in any subsequent bank correspondence. The matter was raised by the client with the bank and the charge, €120,000, was refunded in full.

8. Value Dating of Direct Debits

The routine reconciliation of overdraft interest for a major retailer (turnover of > €1 billion) identified a manual intervention made by bank in its value dating arrangements over a long weekend (which the Bank had failed to reverse). This resulted in a bank refund of €600,000 in respect of the continuing error over two years.