AFP Blogs

Chief financial officers and treasurers will convene in Washington in May to discuss how to operate in today’s financial environment.

The Association for Financial Professional’s Sixth Annual Global Corporate Treasurers Forum will take place at the Four Seasons Hotel, May 16-18, with Bank of America Merrill Lynch as the exclusive sponsor.

“AFP members have played a critical role in maintaining the financial stability of their organizations through the recession,” said Jim Kaitz, president and CEO of AFP. “Now they are moving forward based on new economic realities.”

Speakers include CFOs of McCormick and the Ratner Companies as well as treasurers of Yahoo! Inc. and Global Container Terminals.

“Bank of America Merrill Lynch is proud to sponsor this gathering of financial executives, which comes during a pivotal period for the treasury management industry,” said Dub Newman, Global Treasury Executive at Bank of America Merrill Lynch. “These discussions should prove invaluable to providing treasurers and executives with a deeper understanding of key issues and meaningful solutions to help businesses optimize their working capital.”

For more information on the Global Corporate Treasurers Forum, see www.afponline.org/gctf or download the event brochure.

When making payments to China, be absolutely sure you have the proper to documentation to do so, said Bill Lowe, SVP and Treasurer of LiveNation, Inc. “If you’re trying to bring money to fund your business or a shareholder loan, it’s especially important because that money has to come back out eventually,” he said. The first step you should take is to talk to your tax advisor and/or legal counsel, Lowe added.

In a question-and-answer period, Bell said the size of banks will be reduced. “It’s too difficult to manage” a trillion-dollar financial institute. “You’ll bank more and more with the locals.”

Asked about the economic impact of the swine flu pandemic, noting that the Mexican economy is in dire condition, Bell said, “Mexico has been very hurt. The answer for here is, ‘I don’t know.’ SARS had a temporary effect on the economy. These pandemics, unless you get something like the flu epidemic in 1918, the economy bounces back quickly. It will have some effect but not that serious.”

Bell ended with the following thoughts: “I see a slow period of growth but with some increase in interest rates. What are the implications of all of this?

“The world is diametrically opposite what it was a few years ago. We had a period of rapid growth. Housing prices were going up. And it was very easy to get money from a bank. Now we have very slow growth. We’ve gone from easy money to very tight money. And government is playing a much bigger role in the economy. And we’ll see more financial regulation. What I can guarantee is that it will change again. People will start to spend again but my guess it won’t take place for a few years to come.”

Leverage will be greatly reduced around the world, Bell said. “What does that mean? This reinforces the fact that we’ll have a period of slow growth ahead of us. This will have an effect on emerging markets like China. But I am confident that some of these developing countries will come out of the recession quicker than more developed countries.”

Ninety Days in Office

An influential international economist praised President Obama’s first 100 days as a “great success” and sounded an optimistic note that the global economy was improving.

Speaking at the 2009 AFP Payments and Retail Treasury Forum in New York City, Geoffrey Bell, president of Geoffrey Bell & Company and Executive Secretary of the international economic think tank the Group of Thirty, said the U.S. economy will stop falling some time later this year. “It will not look like a ‘V,’” he told attendees. “It will either be a ‘hockey stick’ or an ‘L.’”

Bell also said President Obama’s stimulus package has helped, noting that a number of economic indicators were starting to improve. “There’s no question we’re seeing a number of green shoots,” Bell said. “Things are not getting as worse as fast as they were, and that lets you believe you can see a bottom eventually.”

Banks avoid being “behind” lenders in better security position
If you don’t have to open your deal, don’t
Banks generally prefer arranged verus underwritten (guaranteed) deals
Fewer financial institutions may commit to new deals
The pendulum swing from institutional lenders to bank lenders means ancillary business matters…a lot

Don’t just ask for references when interviewing vendors; ask to visit one of their current clients. “We visited a customer site and heard the good, the bad and the ugly,” said Kelly Kendall, senior director of revenue management with YRC North American Transportation.
Kendall led a presentation about how YRC automated accounts receivable. YRC chose Open Scan Technologies in part, Kendall said, because other vendors couldn’t produce clients or made promises they couldn’t keep. “We heard them say, ‘We’ve got that,’ then when I asked them about it they’d say, ‘It’s in an upcoming version of our software,’” he said.

Despite a starting time toward the end of a long day, Forum attendees were unusually alert for the general session, “Maintaining Liquidity in the Current Credit Environment.

PNC’s economists predict that the U.S. economy will pull out of its spiral at the end of the year in part because of the Fed/Treasury efforts. “How much is real growth and how much is from the stimulus? How do you benchmark it against the past?” said Richard DeVore, Executive Vice President for The PNC Financial Services Group and Chief Credit Officer for National City.

What forms of capital are available today? DeVore said for retailers who need short-term financing with revolving credit facilities, borrowing base deals are available but not so for cash flow while factoring is sideways. For long-term financing of debt, there is no institutional and high-yield, unsecured and equity loans available right now, he said. “If a deal happens, it’s likely asset-based and I know you don’t like to hear that because it has the most controls on it,” he said. Of the seven retail finance deals that have occurred this year, only one was unsecured, he said.

Daniel Littman, Senior Payments Research Consultant, Federal Reserve Bank of Cleveland took a different tack and compared payments to, of all things, trans-oceanic shipping. Both are old, complex and labor-intensive. And both underwent revolutions that started slowly in the 1950s. Container ships were created in the 1950s and transformed shipping while credit cards and automated processing began during the same period.
Even though the concept of payments is old, even ancient, this mature business is still innovating, Littman argued. “Innovation at the periphery includes PayPal, Google Checkout, BillMeLater, and so forth,” he said. “Most of us don’t need to worry about them for a while because they all are on the same ‘set of tracks’ – they still flow through the ACH system.”
Disruptive innovation includes biometrics, but that won’t be common for 10 or 15 years, Littman said. “E-commerce payments systems are niche products,” he added. “PayPal may be large, but it is still a niche product. Revolution Money doesn’t even have a niche.”
Even cash, the ultimate mature payment method, is undergoing core innovation, Littman argued. Cash recyclers are new-fangled smartsafes that have all the functionality of smartsafes but also put the money into cassettes for the retailer to recirculate. “It’s a revolution because nothing has happened to cash since the ATM in the 1970s and it lets retailers divorce themselves from local banks.”