Lazard sticks with its own advice
With the business models of many of the largest financial firms destroyed by rapid deleveraging, it suddenly looks smart to be a purveyor of independent advice. The biggest, Lazard, finds corporations, governments and other banks desperate for help in repairing their balance sheets. Peter Lee reports.
LAST MONTH, SIG, a specialist supplier of insulation and other materials to the UK and continental European building and construction industries, announced a £325 million ($469 million) placement of equity to existing and new shareholders to strengthen its balance sheet for the worrying and highly uncertain times ahead.
The Sheffield-headquartered company, which grew rapidly from 2003 to 2007 partly through acquisition, employs 13,300 people operating from 800 sites. It spent 2008 hunkering down as trading deteriorated. It cancelled planned acquisition spending, closed 80 sites, cut 7% of its workforce, and improved management of working capital.
It remains to be seen, though, if this will be enough to preserve it through an economic downturn of unknown duration and severity.
In June and July this year, SIG faces debt maturities totalling £78.8 million, which it must either roll over or repay. Although it has the cash to do this, it then faces debt maturities totalling another £184 million in May and July 2010 and runs the risk of breaching covenants on leverage ratios on those bank facilities. Seeking waivers on those covenants risks encumbering the company with high fees and higher interest service costs, even if the debt maturities are extended.