Stuart Gray discusses how the pandemic reshaped corporate treasury, forcing companies to rethink liquidity strategies and financing structures. Fixed costs ballooned, risk profiles shifted, and the old playbook stopped working.
Foreign. So from a liquidity perspective, the pandemic obviously had a massive effect on us. I mean, in the same way that it's, you know, it's had a massive effect on the aviation industry and, you know, many other industries, if not all industries. Unlike some businesses, we have a license obligation to continue to provide the service irrespective of the level of traffic. So what that meant for us is that whilst we were cutting back where we could on all sort of discretionary costs, we still obviously had to maintain a large cadre of controllers. It takes a long time to train them up and you can't just sort of turn them off and then, and then rehire them again. And so our cost base in many respects is very fixed. And so the moment we recognized that traffic was falling and not looking to bounce back particularly quickly, we had to get in gear pretty quickly to try and firstly pull in our current liquidity, but then find some more liquidity over the course of August 2020. But then pretty soon we recognized that this sort of, well, the very complex financing structure that the business has operated within since just after 9 11. So since 2003, we had a whole business securitization structure which was ideal at the time because the company was highly geared, didn't have an amazing credit rating and it was in a very appropriate structure. But given the current position of the business, with at the time very low gearing entering into the pandemic and a strong credit rating, it was a bit of a straitjacket that prevented us from being able to respond appropriately to the pandemic. So we embarked over the course of 2020 on a strategy to completely remove the existing financing structure that we had. So the whole business securitization would go. That involved redemption of, of all of the listed bonds, the bank facilities at that time, and some of the inflation swaps as well, would go not something that's undertaken very often. There have been quite a few sort of trends leading up to the pandemic that have raised the profile certainly of the treasury team within nats, and I think probably across many companies, be that the cyber risks or Brexit and now the sort of the growing ESG trend in terms, certainly on the financing side, I think that the pandemic has really brought the importance of the treasury team to the business to the fore. And I don't, as I said, we're not really over this yet at the moment. And I think what we're very mindful of is there can be a few more bumps in the road. Which could well mean more liquidity and funding challenges that need to be addressed. So I think we're mindful of that. And I think also it has changed businesses, it has changed risk profiles of businesses. And also I think people's willingness to accept risk and all of that, I think, leads to new opportunities for the treasury team. I think that making sure that the team themselves, the treasury team, are alive to this and themselves ensuring that they are as up to speed as they can be on the risk is helpful. Because I think the other thing that we're very conscious of, and I think this would be true of most treasury teams, that you're often, you're there as a service provider in many respects, but others around the business trying to. To do stuff, and they often come to you worried about something, be that an FX problem, they've got FX risk or something. I think the same is probably true of cyber in a way as well. They're conscious that you're in charge of the bank accounts. That's where the cash is. What's the risk that the accounts get hacked, they don't get paid when they want to. These are things that people could worry about and they'll come to the treasury team seeking sort some form of reassurance.
