Photo of Suzanne Janse Van Rensburg, Bank of America Merrill Lynch, Michael Brown and Declan Murtagh, Digital Realty Trust and Petra Lahtinen-Kalsi, Citi.
Multiple challenges met by multiple projects delivering fantastic results: it’s all possible if the team pulls together.
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Michael Brown (and team1)
US, Europe and Asia
Digital Realty supports the data centre, colocation and interconnection strategies of more than 2,300 firms across its secure, network-rich portfolio of data centres located throughout North America, Europe, Asia and Australia. Clients include domestic and international companies of all sizes and sectors.
Wee Leng Ang
in partnership with
Family spirit: how global operations can work in harmony to get impressive results
Digital Realty has grown rapidly in recent years, both organically and as a result of the acquisition of US colocation, interconnection and cloud enablement firm Telx in 2015, eight data centres in Germany, the Netherlands and the UK from Equinix in 2016, and through the strategic merger with DuPont Fabros in 2017. Fast growth has presented many challenges, globally and regionally, which have been addressed swiftly and effectively in the past year.
On the global stage, the firm has a treasury team of just six people (one in Asia, one in Europe, three in the US and a global head). Each individual is critical to the smooth functioning of treasury worldwide.
The company needed to guarantee 24-hour coverage for all regions and ensure all obligations are met in the event of serious illness, cyber-attack, power outage or other problems that would put one region out of action. However, there was no centralised list of banking and internal department contacts for disaster recovery and/or cross-training purposes. Furthermore, global revolving credit facility borrowing templates were not readily available, and it was also difficult to identify approved signers for global bank accounts.
As part of the solution, a worldwide business continuity plan was agreed and developed, this being tested on a regular basis. Additionally, global staff are now trained on cash management platforms, processes and procedures for all regions. There are frequent team calls to ensure coordination and an annual global team ‘in-person’ meeting to strengthen key relationships and discuss key initiatives. And, on top of this, a rolling 30-day dashboard of global debt and other obligations has also been developed. Finally, a comprehensive worldwide contact list, specifying authorised signers for bank accounts, and easily accessible borrowing templates, have also been created as part of the disaster recovery plan.
In addition, on a global basis the treasury team worked closely with its banking partners to establish and/or increase daylight overdraft limits on its accounts for increased protection and flexibility.
Not content with tackling global issues, treasury knew that each region was also facing specific challenges.
EMEA: pooling results
In EMEA, Digital Realty has multiple properties, each with a different cash requirement and bank account. Largely due to tax and local restrictions, there was considerable trapped cash within some entities. As a result, it had to borrow to fund its capex requirements within EMEA. However, even when funds could be routed around the group, it was time-consuming to manage on a weekly/monthly/quarterly basis, and complex to maintain or achieve tax-efficiencies. The company wanted to address this problem and to increase its long-term financing in local currency to hedge its balance sheet and income statement.
Its solution was to develop a notional pooling structure for EUR (29 entities) and GBP (18 entities). In creating these, administrative time and effort spent moving funds to meet capex demand elsewhere in the group was eliminated. Today, Digital Realty looks at the gross pool positions and expenses for the following month and borrows as and when required. This greater visibility means that idle cash levels have been reduced by 80%, minimising costs associated with holding a negative yielding currency and accelerating working capital.
The effective cash management solution has improved its available debt service coverage ratio (DSCR) in EUR and GBP, while simultaneously reducing its borrowing costs. The additional issuance of approximately US$1bn+ in long-term debt in EUR and GBP naturally hedges its balance sheet and income statement.
In Europe, when Digital Realty acquired eight data centres in Germany, the Netherlands and the UK from Equinix in 2016, it inherited unique banking partners, systems and processes in each country. It was crucial to build trust with teams at the newly acquired assets where these had been acquired just a year earlier and had moved banks at that time: there was an understandable reluctance to put them through the same migration process again.
However, Digital Realty’s immediate challenge was to ensure access and visibility into these country operations and their bank accounts to ensure continuity of transactions. The goal was to migrate the accounts to a single banking partner, and strengthen the liquidity structure already in place.