Category

Capital Allocation

Capital AllocationCapital Markets
May 20, 2021

Back in Fashion, Buybacks Have Corporates Scoping Capital Structure

Many corporates are deciding whether to restart share repurchase plans suspended in 2020.After the pandemic hit, the volume of share repurchases plummeted and what continued was mainly executed by companies managing the top-20 programs in terms of volume, Societe Generale bankers told assistant treasurers at a recent NeuGroup meeting sponsored by the bank. Dividend payouts, meanwhile, stayed relatively steady and were only cut or canceled as a last resort, Societe Generale said (see chart). An increasing number of companies have…
Justin Jones
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Capital AllocationInsurance
March 18, 2021

Where Captives Fit in the Insurance Puzzle Corporates Want to Solve

Captives offer tax advantages and flexibility, but treasury teams must make sure trapping cash in them is worth the benefits.Rising insurance costs are putting more focus on captives, a solution that offers tax advantages, flexibility and lower costs than traditional insurance. For those reasons and others, several members at a recent meeting of NeuGroup for Retail Treasury said they plan to expand their captives to cover more risk.Other members say captives are not a good use of capital for their…
Justin Jones
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Capital AllocationCapital MarketsCash & Working Capital
March 11, 2021

Do Stock Buybacks Create Value or Just Return Capital to Investors?

Members at companies with excess cash discuss whether share repurchases generate economic value for shareholders.ConocoPhillips on Wednesday announced it is resuming its share repurchase program, citing its “long-standing priority to return greater than 30% of cash from operations to shareholders annually.” The company is not alone: A recent NeuGroup Peer Research Survey showed that 82% of respondents consider the return of excess capital the primary objective of their company’s share repurchase program. Only 9% said creating shareholder value was the…
Justin Jones
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BankingCapital AllocationCapital Markets
March 2, 2021

A Third Path for Stock Buybacks: Enhanced Open Market Repurchases

Some NeuGroup members have turned to eOMRs to get the flexibility of OMRs and pricing below VWAP, like ASRs.Many NeuGroup members across groups at recent meetings agreed they have enough excess liquidity and trust in market stability to restart share repurchases; but there has been a range of views about how much emphasis to place on the price per share a corporate pays for its own stock. Where companies fall on the spectrum of answers may determine if they opt…
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Capital AllocationCapital MarketsESG
March 2, 2021

Getting Granular on Green Bond Proceeds: Capex? Opex? Both?

Some investors prefer that green bonds finance capex projects, but corporates use proceeds for opex, too—with caveats.How a corporate intends to spend the proceeds from a green bond is integral to deciding whether to issue the bond in the first place. You need to have sufficient uses to create a deal that is large enough to make the costs worthwhile and ensure that investors will participate. NeuGroup members at a recent ESG working group meeting addressed a related, more granular…
Justin Jones
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Capital AllocationCash & Working CapitalCOVID-19
February 18, 2021

Cash Cushions and Covid: Retailers Not Yet Ready To Declare Victory

Retail treasurers returning to offense with share repurchases and dividends are proceeding with caution.A growing number of retailers in the NeuGroup Network are spending or preparing to spend some of the excess cash they raised at the beginning of the pandemic on share repurchases and dividends. But most treasurers at these retailers remain cautious and conservative as they return to playing offense—not surprising given that these companies were among the worst impacted by lockdowns and social distancing. Declare victory? “One…
Justin Jones
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Capital AllocationCapital MarketsCOVID-19
February 11, 2021

Sending a Strong Signal: Accelerated Share Repurchase Programs

As more companies resume stock buybacks, some treasurers are feeling pressure to use ASRs.Corporates eager to send a clear signal to investors about their financial health are brushing the dust off stock buyback plans and weighing—if not committing to—accelerated share repurchase (ASR) programs. That was among the takeaways from a NeuGroup meeting of treasurers this week. It’s the latest development in a journey that began in the spring when the pandemic slammed the brakes on many share repurchase programs. In…
Justin Jones
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Capital AllocationCapital MarketsTalking Shop
February 11, 2021

Talking Shop: Do You Use Barra Beta or Bloomberg To Calculate WACC?

Member question: “Is anyone using Barra to calculate WACC (weighted average cost of capital) or do you use another service provider? “To calculate cost of equity, we use our beta available from Bloomberg. Over the last year, our beta has decreased. The lower beta results in a lower calculated cost of equity and then WACC.“We think this could be a short-term impact and need to be very thoughtful about how to apply it in various analysis. In recent conversations, we…
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Capital AllocationCapital Markets
February 9, 2021

Spin-off Class: Perspective From a NeuGroup Member Pedaling Hard

Spin-offs mean complex, time-consuming work on capital structure, bank accounts, credit facilities and more. Spin-offs are huge strategic undertakings for corporations looking to part ways with a subsidiary or business. And finance teams, including treasury, do a lot of the heavy lifting to manage a complex process that can take years to complete. At a recent NeuGroup meeting, one member in the midst of a spin-off described the process as an “all-consuming activity.”Afterward, he agreed to share some insights and perspective…
Justin Jones
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Capital AllocationCapital Markets
February 9, 2021

Why Spin-offs Are Complex, Time-Consuming Affairs: A Lawyer’s View

The legal perspective on spin-offs from attorneys at Gibson, Dunn & Crutcher.Spin-offs are intricate, multifaceted endeavors for corporates that decide to take a subsidiary and make it an independent public company. In addition to internal finance and tax teams, they can involve scores of investment bankers, auditors and lawyers. At a recent NeuGroup meeting, one member in the midst of a spin-off described the process as an “all-consuming activity.”For a look at some of what’s involved, NeuGroup Insights turned to…
Justin Jones
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