Q. Why should I pay bond managers any attention at all if we haven’t issued bonds for a long time and we are not planning to do so for a while?
A.Can I borrow your crystal ball? How can you say with absolute certainty that you won’t issue bonds for a while? Now that equity markets are looking pretty useless and the syndicated markets are closed to all except those with the very highest credit ratings, bonds are looking like the only game in town. But you are to be congratulated for remembering that bond managers exist at all. All too often IROs treat bondholders as though they were invisible. There are any number of ways to raise capital through the debt market, so it may be worth investigating whether your company should issue bonds and harness the interest of a bond manager or two.
Q. How should I focus my company’s message to both equity and debt managers without getting opposite reactions?
A. It’s easy – just have one message. In any event there should always be one message even in companies where the investor relations team speaks to the equity markets and the treasury speaks to the debt market. If this is the case, you should be operating cheek by jowl with your treasury department to make sure everyone is working off the same page. Make sure you know exactly what their communications program is and vice versa. The point is, debt or equity, you want to keep your investors confident about your company and its ability to service its debt and finance its working capital requirements. So there must only be one message.
Q. We have a large amount of debt outstanding and find it difficult to target bond managers whose profile is suitable for our company. How can I track them down?
A. It’s not difficult to find out which institutions buy and hold corporate bonds; just ask any investment bank. Although institutional investors tend to buy and hold fixed-income instruments rather than trade them, the profile of your company’s bondholders can change in a very short space of time if you issue a profit warning.
Every institution that can hold equities can hold bonds, although the reverse is not true, so there are many more potential bondholders than equity investors. So do something practical, particularly if you are a bond novice, and call up the head of corporate bond sales at your most friendly investment bank and invite them out for a cup of coffee. Ask them to outline who their major clients are in the corporate bond market and also to advise on who the major buyers are of corporate debt. Don’t expect them to have won the Nobel Prize for economics or to be intellectual beyond description, but do expect them to have a broad knowledge of the debt capital markets.
Q. My CEO and CFO are busy enough meeting with equity managers. Why should they waste time with bond managers if they are just short-term investors? Can’t they just get the information they want from their equity colleagues?
A. Occasionally a question comes along that causes me to marvel at the depth of the author’s reasoning. First, it’s completely wrong to describe bondholders as short-term. I admit that they can become pretty short-term if your company puts out a profit warning, but if your credit rating remains steady then your bond investors will stay where they are. That doesn’t mean you should expect them only to require second-hand information. Treat them like second-class citizens and you will be treated as a second-class investment.
E-mail questions to Heather McGregor – [email protected]. McGregor is a former IRO and investment analyst who currently works on IR assignments for Taylor:Bennett, an executive search firm specializing in communications jobs
