In contrast to Griffith's client, another participant, Michael McAdams, a former chief executive of Four Corners Capital who for decades put together syndicated loans, suggested that other corporate borrowers may make lenders more amenable to lending through the use of derivatives. The lending-approval officials of a syndicate might want to lend to a poultry business that can prove it effectively hedges pricing risk by buying poultry futures or a wire manufacturer that does a good job of protecting against copper-price fluctuations, he said.
Further, if a finance chief's boss doesn't believe in buying derivatives to hedge risks, "you can show the banks or [syndicates] how to do it" so that they can buy the proper instruments to manage their client's risks, said McAdams.
Besides hedging, many companies are buying credit insurance on their receivables to make themselves more attractive to lenders, according to Griffith, who acknowledged that, unfortunately for the insured, the policies can be cancelled on very short notice. "They are an extra added protection for any borrower that may be on the fence," he said.
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