Corporate capital planning: debt restructuring and refinancing free up cash.

• Author: Stomierowski, Peg
• Position: FINANCIAL SERVICES

Companies in Alaska, as elsewhere, whether weathering the financial storm well or under duress, are considering debt restructuring and refinancing strategies. They are looking for ways to help them hang tough in a troubled economy, keep their doors open, and free up cash for various purposes, including acquiring weaker competitors. These capital planning approaches are expected to continue for at least a year.

Besides the potential to restore cash flow, renegotiating debt at historically low interest rates can allow a company to stretch out payments, sometimes at more favorable rates and terms. Some firms will seek the consultation of financial management specialists in reviewing the possible terms and doing the necessary negotiation. Since managing debt, with its high stakes, can be a stressful process, finding the right institution to work with is important.

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MATCHING CAPITAL NEEDS WITH SOURCES

The 11 member staff at Alaska Growth Capital (AGC) has been busy. Small business loan volume is at an all-time high and expected to continue that way well into 2011, said Chief Executive Officer Hugh Short. Annual lending at the state's only business and industrial development corporation (BIDCO) is expected to triple over 2009, to more than $35 million in 2010, Short said, including a diversity of clientele who visit its small office environment to explore their options.

A niche lender, AGC offers government-guaranteed loans in an attempt to maximize use of Small Business Administration (SBA) and U.S. Department of Agriculture (USDA) programs. Short says his staff sees many clients who have failed to achieve the credit solutions they sought from more traditional lenders and have been referred by banks that turned them down. Additionally, AGC has been building a significant new markets tax credit portfolio, with AGC receiving $50 million in allocation from the U.S. Department of Treasury in 2009.

Sources of financing assistance for larger firms also include the Alaska Industrial Development and Export Authority (AIDEA), observed Brian Nerland, president of Alaska operations for KeyBank. While he was seeing more uptick in loan demand than debt restructuring, he said, KeyBank representatives have been talking to clients about areas of risk to be mindful of, including interest rates. He says relief may be available either through fixed-rate loans or interest rate swaps, which allow companies to lock into interest rate at their...