With their banks likely to be hamstrung by toxic assets, senior finance executives often found that searching for other sources of funding was the best they could do in terms of capital markets in 2009. Toward the end of the year, equities and debt assumption began to rear their heads as ways to finance corporate assets. A prime example was Exxon’s $41 billion stock-for-stock acquisition of natural-gas producer XTO in mid-December, which included the assumption of $10 billion in debt. But with stock markets in the doldrums for most of the year, CFOs found bond markets a most alluring haunt.
Indeed, 432 top finance executives surveyed by CFO in July believed that bonds had the best chance to become the cheapest and easiest-to-get capital in the next three years. From finance chiefs’ point of view, the future prospects of corporate debt beat out those of such stalwarts as bank term loans and revolvers, commercial paper, and leasing. In an interview with CFO senior editor Vincent Ryan, Discovery Communications CFO Brad Singer summed it up this way: “Ultimately, we want to move into the longer-term bond market. It’s much deeper, so you get better pricing.”
Although companies fled toward corporate debt and away from the complications of dealing with banks (not to mention their nearly year-long credit freeze), stocks weren’t exactly forgotten. Knowing how to do different kinds of equity offerings became a key survival skill for CFOs during the course of the year. Indeed, nearly 250 companies issued about $1 billion through secondary offerings in the first half of the year, up 55% from 2008, according to Thomson Reuters.
What’s more, because bankers tended to eschew traditional deal marketing and underwriting, cash-starved companies were offering equities via methods that required less vetting, including PIPEs (private investment in public equity), registered direct deals, rights offerings, and at-the-market offerings.
Overall, such changes in the use of capital markets were among the biggest finance stories of the year. Here are seven of CFO’s top articles covering capital raising in 2009.
Back on Track
It’s been a frightening year for credit-starved companies. Can they relax a little?
“We’ve Got to Find the Middle Ground”
In his new book, Too Big to Save?, Robert Pozen proposes fixes for the biggest financial crisis of our lifetimes.
Lenders: Low Demand Killing Equipment Financing
Tightfistedness isn’t the cause of the downturn in leasing activity, according to equipment-financing executives. It’s the economy, stupid.
When You Can’t Bank On It
Knowing how to do PIPEs, rights offerings, and at-the-market deals could prove a valuable alternative to dealing with stingy banks.
Tripped Up
More companies are violating loan covenants, but there are ways to avoid taking a hard fall.
How Much Is That Toxic Asset in the Window?
Can Treasury’s attempt to create a working marketplace for banks’ so-called toxic assets succeed? It depends on whether those assets can be legitimately valued — and whether the entire plan frees up lending.
Out from Under
Deeply discounted corporate debt may tempt companies to buy it back or exchange it, but such deals are far from easy.