Having refinanced the bulk of its bank debt in 2008, Logica was faced with the task of completing the refinancing process. The company’s objective was to complete its refinancing without requesting extensions to existing bank facilities. In early 2009, as an unrated company, this was a challenge that needed creative thought by the company and its relationship banks.

The issue was largely solved when Logica and HSBC signed a £100m receivables financing facility in July 2009. The facility gave Logica committed and flexible funding at competitive interest rates, and an alternative source of funding to existing bank debt.

With the facility in place, Logica is able to sell receivables from its UK business in exchange for cash consideration, providing a flexible source of committed short-term funding. The facility was structured so that the company sells all of its debtors to the receivables purchaser and controls the level of funding by selecting the desired funding percentage, which can be as low as zero if the company has no need for funds. In this way, the facility acts as an efficient cash management tool and the company does not need to perform a time consuming selection process in deciding which debtors to sell.

It is noteworthy that the receivables utilised to generate the financing were individually negotiated into bespoke contracts. This required an alternative method of transfer, utilising a transaction specific English Law trust to ensure transfer without interfering with Logica’s ongoing operations or contractual position with its clients.

Tim Allison, Group Treasurer, remarks, “The facility provides Logica with diversification of committed funding combined with a flexible, easy to use, cash management tool. Drawings can be as short as one day and for relatively small amounts, or can be for much longer periods and for up to the full amount of £100m.”

The facility was created through excellent collaboration and relationship management between Logica and HSBC with input from their respective legal teams. This had to be designed to co-exist alongside Logica’s existing senior debt facilities and involved a considerable degree of creative thought. Drawings are effectively classed as disposals under the company’s main debt facility, therefore avoiding problems with negative pledge restrictions.

In designing the receivables facility, Logica wished to maximise the operational flexibility of the funding arrangements with minimal disruption to existing bank account arrangements, the underlying business, and crucially, absolutely no change for its customers.

This required Logica to provide HSBC with accurate daily debtor reporting in a simple, transparent and specially designed IT solution. This solution leveraged the power of Logica’s internal systems providing HSBC with the required information.

HSBC then transfer the receivables using the specifically established English Law trust to provide immediate financing without in any way interfering with the company’s ongoing operations.

Allison says, “Having operated the receivables facility for several months now, both Logica and HSBC are delighted with the solution that was created and pleased with the smooth daily operation. An extension of the facility has now been agreed.”