hku guest lecture corporate finance

Corporate Finance: Solutions & International Market Developments | University of Hong Kong, 15 September 2015

Guest Lecture“Corporate Finance: Solutions & International Market Developments”University of Hong Kong – 15 September 2015, Dr. Ruediger Theiselmann


About corpfina

The Corporate Finance Association (corpfina) e.V. was founded in 2013 as an international association to

• foster interdisciplinary exchange of the international corporate finance community across all sectors.

• further develop standards and early address trends in corporate finance.

• foster new scientific and practical findings in regards to corporate finance.

• intensify the dialogue between public, politicians and international rule-setting institutions regarding corporate finance.

Authori-

ties

Issuers /

Corporates

Banks /

Advisors

Analysts /

Media

Investors


Strategic View on Corporate Finance

Corporate Strategy

Growth Restructurings

Organic Inorganic Financial Operational

• Private M&A• Public Takeovers• Distressed M&A

• New Ventures• Joint Ventures• Cooperations

• Processes• Shut-downs• Procurement• (…)

• Strengthen Equity• Adjust Debt• Improve Cash Flow• Divestments


Core Areas of Corporate Finance

M&A

DCM Loans

DCM Bonds

ECM

- Transaction Management

- Valuation

- Take-over Defense / Unsolicited Offers

- Lending, i.e. Syndicated

Loans, Club Deals and

Private Placements

- Leveraged Finance

- Benchmark Bonds (Rated / Unrated)

- High Yield Bonds

- Hybrid Bonds

- Private Placements

- IPOs

- Follow-ons

- Convertibles

- Share Buy Backs


Focus on M&A

Mergers & Acquisitions is inorganic growth (i.e. increasing output and business reach) or downsizing through a share or asset deal.

Asset deal

- Purchase of objects

- All or selected assets of the target are being purchased

- Unusual for common transactions, standard fordistressed M&A, i.e. purchases out of insolvencies (all assets are being purchased without any liabilities)

- Main advantages: not all assets and liabilities need to bepurchased, higher potential for write-offs for the buyer

- Main disadvantages: high complexity given that all purchased assets have to be identified; transfer ofcontracts requires consent of contracting partners

Share deal

- Purchase of rights

- All or selected shares of the target are being purchased

- Main advantages: Complexity significantly reducedcompared to asset deal (only transfer of shares); noconsent of contracting partners required; licenses / officialpermissions don´t cease to exist

- Main disadvantages: Debt can´t be separeted and leftbehind; company can only be purchased as a whole –selection of certain assets impossible


Focus on Equity Capital Markets

Equity is non-repayable capital, not interest-bearing and subordinated compared to debt positions in case of the insolvency of the company/issuer.

IPO

Follow-on

Convertible

Equity-linked note; listed bond can or must be converted into new shares at maturity

Increase of the share capital with or withoutsubscription rights

Issuance of shares on the stock markets for the first time


Focus on Debt Capital Markets

Debt is repayable capital, interest-bearing and senior compared to equity in case of the issuer‘s/borrower‘s insolvency.

• Privately placed Bonds• US Private Placements• Euro Private

Placements• German Schuldschein• Unitranche Facilities

•Combination of debtand equity elements

•Long tenors (up to 100 years)

•Subordinated debt andinterests

• Credit business basedon a loan agreement

• Club Deals (3-5 banks) for small amounts

• Syndicated Loans forhuge transactions

• Leveraged Finance: high yield, special riskprofile

• Listed debt securities• Risk categories:

Investment Grade,Cross-Over, High Yield

• Rated/Unrated

Bonds Loans

OtherHybrid


Focus on Financial Restructurings

Financial Restructurings improve the borrower‘s/issuer‘s financial situation through adjustments of the balance sheet and cash flow reliefs.

New shareholder loans

Conversion of debt into equity(Debt-Equity-Swap)

Management-Buy-In

New external shareholders (incl.

financial sponsors)

Additional contributions from

existing shareholders

Equity

Subordinated loans

Convertibles

Bonus shares

Silent partnerships

Mezzanine

Standstill Agreement

Bridge Financing

Restructuring Loans

Cancellation of debt with/without

clawback

Subordinaton of Debt

Payment in Kind

Letters of Comfort

Debt

Sale-and-Lease-back-solutions

Disposal of Real Estates to SPV

Factoring

Working Capital Management via SPV

On-Balance

Off-Balance

Major Objectives

Safeguard liquidity

Safeguard surviving

Valuation of the company

Disposal of (non-core) assets


Recent International Market Developments

The Corporate Finance World Market has developed dynamically in 2015 so far, mainly driven by M&A*.

• Global M&A volume reached $3.0tr as of August 2015, the second fastest to the $3tr mark on record, behind 2007 when it was reached on 23 July.

• Global high yield DCM average deal size stands at $587m as of August 2015, up 19% from $493m (yoy), and the highest YTD average on record.

• Global corporate loans volume stood at $1.54tr in 1H 2015, down 18% on the $1.87tr borrowed in 1H 2014 and was the lowest first half volume since 1H 2012.

*Source: Dealogic


Discussion on Corporate Finance


Contact Details & Disclaimer

This document has been created and published by the Corporate Finance Association e.V. (corpfina), Frankfurt/Main, and is for information purposes only.

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Copyright © corpfina 2015. All rights reserved.

Corporate Finance Association (corpfina) e.V.

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Email: [email protected]

hku guest lecture corporate finance

Economy & Finance