Treasury Today’s Top Treasury Team 2018 Winner: Digital Realty Trust

Published: Jul 2018


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.

Watch video interview

Michael Brown (and team1)

VP Treasury

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.


  • Declan Murtagh
  • Wee Leng Ang
  • Kevin Lazenby
  • Andy Tse
  • Mini Malik

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.

The Top Treasury Team accolade is always hotly contested with some high profile corporations winning in previous years. Our judges felt that Digital Realty Trust have really pushed the boundaries with their submission which is all about multiple challenges being addressed by multiple projects delivering fantastic results: it’s all possible if the team pulls together. That team, under the direction of Michael Brown, VP Treasury, is a most worthy winner in 2018. Congratulations from the team at Treasury Today.

– Richard Parkinson, Chairperson, Treasury Today

By explaining the rationale for a move to a single banking partner and the benefits for the entire group, the teams at the newly acquired assets became an integral part of the migration process, gathering data and building knowledge across the group. The many hundreds of existing customers at the data centres in Germany, the Netherlands and the UK were seamlessly migrated to Citi.

As well as migrating all transactional activity from inherited banks to Citi, Digital Realty took advantage of the opportunity to streamline various processes and procedures to improve efficiency.

In addition, Digital Realty faced significant currency risk exposure, given its planned acquisition of Equinix assets in Europe in USD as the Brexit vote approached. Although polling (and the markets) indicated a ‘remain’ vote, Digital Realty believed there was a material risk of a ‘leave’ vote – and consequent depreciation of EUR and GBP against USD. It was right. The company hedged its net investment position with GBP forward contracts. Settlement of contracts in 2017 resulted in cash gains to the company of approximately US$65m.

Previously, awareness of cybercrime within Digital Realty was concentrated within IT. However, the increasing threat made it critical to broaden knowledge across the organisation. Digital Realty developed a staff training programme to combat more sophisticated methods of attack. This programme was rolled out to all EMEA staff in 2017, with a special emphasis on finance staff to protect banking software and prevent payment fraud. The programme is reviewed and revisited annually to ensure all finance team members are fully informed of the latest threats.


Video interview

North America: exposure controls

The company inherited multiple banking partners, systems and processes following the acquisition of Telx in 2015 and the strategic merger with DuPont Fabros. Working with multiple banks reduced its visibility and control.

Legacy acquisition accounts were integrated with Digital Realty’s US banking partner (Bank of America Merrill Lynch), enabling the closure of legacy acquisition accounts, making significant savings. A link was also built between the new accounts and Digital Realty’s Kyriba TMS, facilitating automation efficiency improvements.

Digital Realty has US$3.55bn of floating rate multi-currency credit facilities, US$1.55bn of which is term loan, exposing it to interest rate risk. In addition, the company planned to issue debt as part of the financing plan for the strategic merger with DuPont Fabros Technology, further exposing the company to interest rate risk. Clearly the company needed to mitigate these risks and also sought to save on interest expense related to its planned extinguishment of DuPont Fabros Technology’s debt.

To mitigate floating rate exposures, it executed US$261m of interest rate swaps and US$600m of debt pre-issuance hedges to hedge rate risk; the pre-issuance hedges were slightly in-the-money and terminated when longer-term debt was issued. A tender offer for DuPont Fabros Technology’s outstanding notes was successful; US$0.9m was saved compared with the standard call redemption notice.

To take advantage of favourable market conditions, Digital Realty issued US$1.8bn debt in advance of a planned acquisition. The team needed to safely manage these proceeds until the acquisition closed. Funds were deposited in multiple cash investment vehicles to mitigate concentration risk while meeting cash investment policy parameters regarding credit, safety and liquidity. This strategy generated over US$2m in interest income.

APAC: banking consolidation

Digital Realty changed its cash management bank in Asia Pacific, resulting in multiple banking partners, which increased complexity and costs. A host-to-host solution was set up between its ERP system and the new banking partner, Bank of America Merrill Lynch. When the new solution was stabilised, Digital Realty closed old accounts and took the opportunity to review and close other accounts which were no longer in use.

Because of legacy banking arrangements, funding of its accounts was managed via multiple internet banking platforms. This created multiple manual processes, all data being managed in Excel. To address this issue, a host-to-host connection was set up between Digital Realty’s Kyriba TMS and its cash management banks. This streamlined the funding process for domestic and cross-border transfers and now enables statements to be sent directly into Kyriba for forecasting.

A further challenge came as Digital Realty entered into a joint venture in Japan in November 2017. Treasury needed to obtain documentation from its lending banks in both US and Japan as part of the loan agreement within a short time frame. The solution here was to obtain all the necessary consent documents from the lending banks in different time zones, the treasury team working in a carefully coordinated way through its strong lender relationships to meet the deadline.

Measuring benefits

The treasury team at Digital Realty has made significant changes and gained notable advantages in doing so. As examples, inter-company settlement has been simplified, reducing time spent on administration, and it has increased streamlining and automation, removing the need for additional headcount and enabling treasury to be run with just six people.

With the knowledge that there were hundreds of nominations from highly talented world-class teams of professionals, winning the Adam Smith Award for Top Treasury Team is truly a tremendous honour. It firmly acknowledges the hard work and dedication of our team and the results we have been able to deliver for Digital Realty.

– Michael Brown, VP Treasury

Today, the firm’s treasury in any region can continue their business as usual in any circumstances as a result of the global business continuity plan developed in 2017. By resolving trapped cash issues, financing capex in growth markets is now easier, borrowing costs have been reduced by an estimated US$500,000 – US$1m per annum, and by carrying low global cash balances it has minimised negative interest exposure.

What’s more, the team has reduced the number of EMEA bank accounts by 33% and reduced its EMEA banking partners from four to one. In APAC, bank accounts have been reduced by 43%. This has helped increase visibility of bank fees, resulting in an improved ability to monitor services and reduce fees. Financial risk management (FX and interest rate) strategies have to date delivered more than a US$65m benefit.

The Treasury Today view

Digital Realty’s cash management projects in 2017 prioritised coordination, automation, visibility and control as assets grew from US$12bn to US$21bn.

Its EUR and GBR notional pool implementation was challenging but cut borrowing costs and cash balances, minimising interest on negative-yielding currencies. Overdraft limits have been increased worldwide, improving flexibility. Following large acquisitions in EMEA and the US, accounts were swiftly integrated in line with best practice. Excess cash required for a forthcoming acquisition was invested to ensure safety and liquidity while generating interest income. And treasury has successfully automated domestic and cross-border payments via the company’s TMS.

The team constantly strives to streamline processes using intellect and technology, freeing up their time for value-added activities. These achievements are possible because of the resolute commitment and family-like bond of Digital Realty’s treasury team, which has just six members worldwide. It is truly a worthy winner of the Treasury Today Adam Smith Top Treasury Team Award 2018.

Keys to success

  • Communicate candidly and often. Build strong internal and external relationships through open and transparent dialogue.
  • Above all else, get the basics right. Understand and support the business, ensuring liquidity at all times from day to day operations to major acquisitions.
  • Design holistic, global processes and systems that are flexible, scalable. This will greatly impact the speed and effectiveness of M&A related integrations.
  • Continuously assess risks from every angle (financial, market disruptions, resources, systems, etc). Expect (and plan for) the unexpected.
  • Cross-train to build key skill and process redundancies in the system.
  • Embrace technology to automate and streamline processes. Continuously challenge the status quo.
  • Reach out and connect with professional peers.

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