14th Annual Global Insolvency & Restructuring Conference Stockholm May 2008 Cash Pooling - introduction

Transcription

1 14th Annual Global Insolvency & Restructuring Conference Stockholm May 2008 Cash Pooling - introduction Nordea Nordea Finland Plc Group Legal Leena Villman-Hurri

2 Cash pooling Definition Liquidity management whereby funds are physically or notionally concentrated to a single position Goal / advantages For calculation of interest, making of investments, intra group funding, balance sheet improvement Techniques Cash Concentration Notional Pooling

3 Cash pooling - implementation Corporate Support the effective cash and liquidity management of the group of companies locally and globally Legal and tax Withholding tax, Thin Capitalisation, Transfer Pricing, Intra-group lending Interest Income Risk management Risk balance between the credit risk and the expected incomes

4 Cash concentration / Zero Balancing All participants have an account with the bank One account is Top Account against which the other accounts, Sub-Accounts (usually) at the end of day are zero balanced Fund transfer transactions under zero balancing may be called as sweeping and topping ( sweeping/topping -service) Balance of the Top Account before ZB transactions + 50 Top Account Balance of the Top Account after ZB transactions Overdraft Facility 500 (- 100) (+ 150) (- 200) -100 (+100) (-150) (+200) 0

5 Zero Balancing - Effects Before cash pooling Zero Balancing Subsidiary Parent Top Account Debt relationship Reporting / shadow accounting in respect of zero balancing transactions is usually available to track the transferred amounts Security on behalf of / in favour of Debt relationship - due to cash pooling Security due to cash pooling on behalf of / in favour of

6 Cash concentration / Balance Netting Only one company has an account ( Top Account ) with the bank The Top Account is debited / credited through notional accounts ( Transaction Accounts ) The Top Account grants authorizations to other group companies to use the Top Account through a specific Transaction Account The balance of the Transaction Account shows the debt relationship between the Top Account and the Transaction Account + 50 Balance of the Top Account in the morning Balance of the Top Account Top in the evening Account Overdraft Facility 500 (-100) -50 (+150) +100 (-200) -100 Transaction Account Transaction Account Transaction Account (-100) (+150) (-200)

7 Balance Netting - Effects Before cash pooling Balance Netting Subsidiary Parent Transaction Account Top Account Debt relationship Account statements for the Transaction Accounts are usually available in order to follow the cash flows Security on behalf of / in favour of Debt relationship - due to cash pooling Security due to cash pooling on behalf of / in favour of

8 Notional Pooling (Interest compensation) All participants have an account ( ) with the bank The funds standing to the credit/debit on the are not transferred/covered, they will stay in the individual s The interest is calculated on notionally netted balances of participating Sub Accounts

9 Notional Pooling - Effects Before cash pooling Notional Pooling Subsidiary Parent Debt relationship Reporting for s is usually available in order to follow the calculation of interest Security on behalf of / in favour of Debt relationship - due to cash pooling Security due to cash pooling on behalf of / in favour of

10 Country / corporate specific solutions, examples Poland: stamp duty 0,5 / 2 % apply to loan agreements Group internal banks One account with the bank Group internal processes Subsidiary Subsidiary Subsidiary Parent Account Account Parent s Account with

11 Cash pooling - Insolvency The of Top Account or the of Sub/Transaction Account credit risk solvent participants day-to-day cash management