A quick look at what’s on International Treasurer’s radar screen.
A number of issues were discussed in this week’s International Treasurer editorial meeting. They include what could be considered the mother of all developing issues for the immediate future: the Greek elections on Sunday, June 17. Other topics include dividend trends, business or company owned insurance plans, international tax planning and dividends for tech companies.
Greek elections. Everyone is preparing for a possible Geek exit after the June 17 elections, even European Union finance officials. According to Reuters, the EU has discussed “limiting the size of withdrawals from ATM machines, imposing border checks and introducing euro zone capital controls as a worst-case scenario should Athens decide to leave the euro.” Un-named EU officials are not expecting a Greek exit, but they might be the only ones.
So in such a wild environment, it’s no wonder that treasurers are still preparing contingency plans. And while they have been doing this since at least December – and IT has been detailing some their strategies (see related stories here and here) – we’ll take a look at more recent thoughts and provide a checklist on what to expect should certain scenarios happen.
BOLI/COLI. We’ll take a look at corporate- or business-owned life insurance as an asset. COLI/BOLI has long been used as a tax advantaged asset that can be well suited for direct and indirect funding of long term liabilities such as employee benefit costs. Many companies regard COLI as their best performing financial asset over time because of its tax advantages and relative stability. And more recently, the Federal Reserve recognized the importance of COLI in overall corporate financial and human resource management by specifically exempting insurance from the “Volcker Rule.” Total COLI assets now exceed $300 Billion. We’ll take a look at how exactly treasurers can utilized this asset.
Dividends. After Dell’s recent announcement that it will offer a dividend, we received a report from Moody’s explaining the current trajectory of dividends paid by tech companies.
Moody’s said in its special report that dividend paid by rated US technology companies will rise in 2012. “We expect these companies’ common dividend payments to approach $26 billion in 2012, an increase of 14.3 percent over 2011, slightly higher than the 10.9 percent average annual growth of the prior four years. The increases themselves won’t affect ratings because dividend payments relative to discretionary cash flow (cash flow from operations less capital expenditures) average a relatively low 21 percent, versus 40 percent to 50 percent for many non-technology sectors.”
In the meantime, Dell’s move is being lauded by some as a good use of capital vs., say, share buybacks. Others say it could get in the way of Dell’s quest to transform itself to a larger player in corporate data, storage, networking and IT services.
Peer Group: LATMPG. This week The NeuGroup facilitated its Latin American Treasurers’ Peer Group meeting in Miami. The agenda was focused on cash/liquidity and working capital management, supply chain financing in Latin America and an Argentina economic and market update, among a few other topics. We’ll offer up our meeting impressions of what members discussed regarding these topics.