Perhaps no group was as relieved this week by President Barack Obama’s announcement of a new plan to resolve the debt fight in Washington as corporate treasurers.
As it happens, I moderated a panel discussion at the US Chamber of Commerce this week that featured three prominent corporate treasurers. We were there to talk about the one year anniversary of Dodd-Frank, but the debt ceiling debate was clearly weighing on the minds of everyone in the room.
The treasurers told me—in comments before the president's announcement—about the aggressive measures they’ve been taking to make sure their companies survive any market event that follows a federal default on August 2nd.
Carol DeNale, senior vice president and treasurer of CVS Caremark, said her company is particularly sensitive to fluctuations in federal healthcare payments, given CVS enormous pharmacy business. She said she’s working on a plan for federal default.
“We've scoped out what funds are coming in from the beginning of August through the end of August and we've also talked to our money managers to see what will occur in some of the money market funds,” DeNale said.
“We have a bond payment coming up in August 15th, we're in an investment position right now so we're just plotting through what our cash needs are going to be every day and what happens if we don't have these receivables from the government, where are we going to go, how's the commercial paper market looking for our company, who will step in incase there is chaos in the market, and then talking to some of the funds.”
DeNale told me that she most fears a TARP-like scenario like the September 2008 failed Congressional vote to pass the financial bailout that caused market chaos. If a default happens, she said, “We're going to come in every morning and figure out what money we need or where we can invest it that's safe. And we're going to have to play every hour and every day separately.
Looking back at 2008, she said, “You know, it was very difficult for commercial paper issuers to find buyers and you know we don't want to have to struggle through that again because it's an absolute hourly event and it's all time consuming, that's all my department was doing was ensuring that we had liquidity for the company.”
Likewise, Tom Deas, vice president and treasurer of the chemical company FMC Corporation, said he’s got a team of six employees pulling long hours to position FMC for any potential federal default.
“We're very actively working to make sure that we have a diversified group of banks ready to hedge transactions that we enter into and help us roll over if we need to existing transactions,” he said.
“The first requirement of a corporate treasury to safeguard the company's funds and to make sure that the company has cash to conduct it's day to day operations and we take that responsibility very seriously.”
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