New report examines methods companies are employing to raise needed capital and offers solutions to improve upon their rate of success
NEW YORK, MORRISTOWN, NEW JERSEY, April 26, 2010 – Financial Executives Research Foundation (FERF), the non-profit 501 (c)(3) research affiliate of Financial Executives International (FEI), and Grant Thornton LLP, the U.S. member firm of Grant Thornton International Ltd, one of the six global audit, tax and advisory organizations, today announced the release of Raising Capital in the Current Credit Markets. The report examines methods companies are employing to raise capital in today’s credit environment and provides essential information that executives need to consider in these challenging times.
The report and analysis is based on data collected using a brief 14-question online survey of more than 250 financial executives, individual interviews with executives of companies that are seeking capital and with investment banking firms, merchant bankers, and economic development organizations that provide or arrange capital.
Co-authored by Thomas Thompson, Jr., Research Associate, FERF, and William M. Sinnett, Director of Research, FERF, the report finds that capital is still available, despite changes in the credit market landscape resulting from the economic crisis. However, lenders and investors have increased scrutiny of the credit quality of companies while seeking greater protections against default risk.
“In our interviews with lenders, we found that capital is available but at higher costs, including increased premiums and covenants for perceived risk,” said Thomas Thompson, Jr. “Many of the capital-seeking company executives we interviewed expressed their frustration not only with the firms that provide capital, but also with the government’s priorities and inability to get capital flows moving more quickly.”
David Weild, who contributed to the study and is Senior Advisor at Grant Thornton’s Capital Markets group and former Vice Chairmen of The NASDAQ Stock Market, forsees a period where preparedness will be a critical success factor for issuers in the debt, equity and M&A markets.
"There is a wave of debt renegotiations on the horizon - what some have referred to as the "Great Wall of Debt," Weild asserts. “Companies that are in a state of “transaction readiness” and can reach more service providers with better information will be more successful and achieve better terms from the lending and investment community than those that are not.”
William M. Sinnett says the key to obtaining capital is for executives to know their options. “Executives should be determining their primary and secondary capital raising options, whether that be senior debt or mezzanine financing or even via private equity,” said Sinnett. “The credit market may take years to recover, so it’s imperative that executives diversify their relationship base both within and across financing institutions.”
To read the full report and list of financing options with overviews, please go to: http://www.gt.com/staticfiles/GTCom/Grant Thornton Thinking/Whitepapers/Raising Capital.pdf
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About FEI and FERF
Financial Executives International is the leading advocate for the views of corporate financial management. Its 15,000 members hold policy-making positions as chief financial officers, treasurers and controllers. FEI enhances member professional development through peer networking, career management services, conferences, teleconferences and publications. Members participate in the activities of 85 chapters, 74 in the U.S. and 11 in Canada. Visit www.financialexecutives.org for more information.
Financial Executives Research Foundation (FERF) is the non-profit 501 (c)(3) research affiliate of FEI. FERF researchers identify key financial issues and develop impartial, timely research reports to FEI members and non-members alike, in a variety of publication formats.
About Grant Thornton LLP
The people in the independent firms of Grant Thornton International Ltd provide personalized attention and the highest quality service to public and private clients in more than 100 countries. Grant Thornton LLP is the U.S. member firm of Grant Thornton International Ltd, one of the six global audit, tax and advisory organizations. Grant Thornton International Ltd and its member firms are not a worldwide partnership, as each member firm is a separate and distinct legal entity.
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