How do we know we have to re-assess our capital structure?

WellCapital can help – we lead capital structure assessments and re-alignments to unlock growth potential.

As part of the assessment of financial sustainability the cost of the various sources of funding is unpacked. The capital structure is fundamental to the business’ long-term sustainability and is the proverbial ‘ham in the sandwich’ in between the business vision and the actual operations. If the interplay between cost of capital on the one hand and the sustainability of long-term funding partners are not continuously receiving attention the outcome oftentimes triggers stress-based restructuring of borrowings. The risk is that the business ends up having to compromise on conditions attached to the borrowings, resulting in sub-optimal cost of capital coupled with inappropriate balance on financial covenants imposed by lenders.

The re-assessment of the appropriateness of a capital structure therefore happens as a minimum at budget intervals, as well as each time a material disruption to the planned financial roadmap occurs. Scenario planning is critical in the assessment and design of the capital structure. What is of critical importance is that the desired capital structure be declared, and the actual reality must then be managed in order to converge with the desired position. Changing the capital structure hardly ever is done in one fell swoop. The better a management team’s anticipation of the future operating environment, given its vision, the better the capital structure is managed.

WellCapital provides corporate finance advisory solutions with the focus on business valuations, financial performance evaluations and due diligence assessments. We act as lead or change-agent in business turnaround and interventions which can result in new or amended busines models, capital structures, mergers, acquisitions, disposals, business processes and forensic investigations.

WellCapital provides treasury advisory solutions with the focus on the various financial risk portfolios (liquidity risk, foreign exchange risk, commodity risk) arising as exposures from the underlying business models in order to develop appropriate risk management policies and strategies with performance metrics. The reconciliation of these performance metrics with the treasury accounting results is undertaken to provide both operational and strategic understanding.

The liquidity risk management includes:
- short-term and long-term cashflow forecasting using predictive modelling to identify the funding requirements and facilitate the operational and strategic decision making
- mapping of all bank accounts and optimisation of banking and lending facilities
- restructuring and refinancing of asset and liability portfolios
- interest rate risk and credit risk management
- obtaining credit rating and debt issues
- optimisation of working capital management
- alignment of cashflow forecasting with operational budgets and variance reporting based on actual cashflows
- development of local and global cashflow pooling
- implementation of intercompany financial support and transactions
- obtaining the necessary regulatory approvals to ensure compliance and control
- the treasury functions and responsibilities within the organisation should have the correct structures and systems to realise the potential positive strategic impact and value added.

WellCapital provides expert and independent advisory services to Board committees and within legal proceedings.

WellCapital prides itself in providing value‐added solutions and services to a wide variety of clients and markets which transcends industry and size and offer the services in a variety of ways to accommodate the requirements and priorities of our clients

ADDRESS

15 Pulipit Street, Southdowns

PHONE

+27 83 556 2466

EMAIL

dries.ferreira@wellcapital.co.za