Photo of Royston Affonso, HSBC, Ciar Timon, Honeywell and Steve Duranti, BNP Paribas.

For many years, Honeywell Treasury has been building excellent relationships across the globe with all its core banks. The company’s bank relationship strategy has enabled Honeywell to maintain global visibility of it’s funds and to effect easy deployment of cash to where it is required for acquisitions, dividends and share repurchases – over $30 billion has been financed over the past ten years or so.

Honeywell’s five-year revolving credit facility of $3 billion as of March 2012, provided by a strong group of 29 international banks, supports the growth of Honeywell’s operations globally and has enabled it to weather the recent economic crisis.

“Our aim is to drive the implementation of the most up-to-date technological solutions in all our countries,” says Ciar Timon, Senior Regional Treasury Manager at Honeywell, UK. “Our vision is a global one – we standardise wherever possible, but with a flexible approach, which takes into account the cultural, regulatory and logistical constraints in each country.”

Honeywell has a strong presence across the Middle East and, over the past few years as a result of its successful efforts to grow, has witnessed a significant increase in complexity in its Middle East countries. It has benefited significantly from the economic recovery in the UAE over the past couple of years, as well as from Qatar’s increasing investment in petrochemical plants. In Saudi Arabia, Honeywell has invested more than $10m in a new facility in the Dhahran Techno Valley and is focusing on bringing talent to Saudi Arabia to take advantage of the growth. In UAE, between 2003 and 2012, Honeywell’s turnover grew from less than $30m to over $400m, ie almost 1600%. Accordingly, they need to ensure that all the banking processes in place are sufficiently robust to cope with increasing activity in a fast-moving environment.

Key objectives:

• Cash management and reporting: review and improvements.
• Bank guarantees: increase in credit lines and improvement of processes.
• Review of bank mandate processes.

The solution was provided by Honeywell Treasury, in partnership with both HSBC and BNP Paribas.

Key features of the new banking arrangements:

• Honeywell Treasury’s policy of promoting technologically-driven solutions where possible has resulted in the implementation of an online bank guarantee solution which will save approximately 260 hours per year, as well as an improved electronic banking connectivity and payroll solution.
• Honeywell Treasury’s strong negotiating tactics have resulted in significant cost savings on cash management transactions. With HSBC, the company have achieved a 40% reduction on existing transaction types, a 25% reduction on transactions for the new cash pool and elimination of implementation fees of $5,000.
• An additional bank guarantee credit line of €50m has been established with BNP Paribas to support Honeywell’s growth in the Middle East. It has also negotiated potential savings of 20% on bank guarantee issuance.
• Both HSBC and BNP Paribas have committed themselves to working with Honeywell on a sensible approach to bank guarantee wording, concentrating on the elimination of clauses which pose the most risk to Honeywell, such as open assignment clauses, but to compromise on the smaller, less important points – Honeywell has encouraged both banks to take a commercial view which enables the bank guarantee to be issued in a timely fashion and the cash to be received.
• Improved bank fee reporting by HSBC has resulted in time savings of approximately 40 hours per year.
• Very importantly, it is the close co-operation and understanding between Honeywell Treasury, the banks and their businesses, which has been the main driving force and has helped to effect substantial process improvements and savings for its Middle East companies.

As Timon concludes: “Honeywell Treasury has many years’ experience of building excellent banking relationships. We understand that it is necessary not only to persuade, to encourage and to push when required, but also to compromise and to work towards mutually beneficial goals.”