CFOs can glean a lot from just knowing who sits on a credit or capital commitment committee, says Daniels, though that information isn’t easy to come by. If the committee is stacked with capital markets product managers, such as the head of debt-capital markets and the head of equity-capital markets, it will likely be most focused on winning underwriting business, says Daniels.
Obviously, the relationship manager cannot be ignored, especially if he or she is a valuable single point of contact. Frequent informal conversations are important, Box says, because the banker may be periodically asked by his or her boss about the company’s operating performance. If a corporate client suspects it will trip a covenant and doesn’t tell its relationship manager, for example, then the banker can’t relay the warning to his or her superior. “It’s hard to recover a good relationship if you’ve made your banker look bad to his bosses,” Box says.
That said, high turnover and industry consolidation have eroded many carefully crafted long-term relationships even as stricter credit policies increasingly dictate or limit lending decisions. CFOs are not likely to get a long-term fixed-rate loan from any bank these days, regardless of how often they lunch with their banker.
Ultimately, who you know counts for less than how reliably you pay. At the beginning of its loan restructuring in late 2008, Pegasus Solutions lost its lead-bank account representative to a downsizing. And Pegasus had been with the bank for only 18 months. But CFO Dubrow was still able to push through amendments to prevent covenant violations. And when Pegasus’s bond debt had to be restructured, the bank helped convince the fixed-income holders that the company had enough value behind it. “We always made our interest payments on the term loan regardless of what else we were doing or funding operationally,” says Dubrow. “That maintained our credibility with lenders.”
While the touchy-feely nature of banking relationships may be all but gone, companies can still earn their way to well-structured, reasonably priced transactions — and the backing of their banks in times of crisis. But smart CFOs won’t stop there. For companies that want to make their banking relationships more than transactional, a near-term future in which banks’ profit streams are in flux will create plenty of potential leverage points.
Vincent Ryan is senior editor for capital markets at CFO.