Initially the bank account landscape was unclear, as the new CEO and treasury weren’t hired until further into the project, meaning a slight delay in finalising partner-banks of the spin-offs.
However, multiple legal steps around entity creation had to be completed prior to opening new bank accounts, then the team needed to create new e-banking instances for each bank involved. A post-spin administrator was assigned, training organised and users assigned to the existing and new e-banking instances in accordance with the TSA.
In terms of cash visibility and forecasting, newly-created bank accounts were set up following both Honeywell processes and the post-spin set up, doubling the work. A solution had to be found for the future state; with GTX using Deutsche Bank and REZI using J.P. Morgan, a bank consolidator was considered.
To ensure payment continuity during the transition period, full cash visibility was needed, including the ZBA cash-pool balances, and a cash forecast for each spin-off account. This needed to take into account the funding step plan being implemented and the moving of the liquidity structure. Forecasting was essential post-spin to allow the new treasury teams time to stabilise.
When it came to payments and netting, the team had to disconnect entities from the Honeywell payment structure but ensure continuity of payments. New payment methods and connections for the spin-off had to be formed, and new contracts prepared for separate netting instances with BMG. Entities and users had to be linked to the new system and delinked from Honeywell’s. Also, netting groups were adapted, reflecting the new cash pool structure, to support cash flow forecasting.
For the funding and liquidity structure and intercompany loans, it was necessary to engineer new cash pool structures. This saw the new entities delinked from the existing Honeywell liquidity structures. Then, revolving credit facilities and long-term financing structures (USD and EUR) were established. As publicly-listed companies, both GTX and REZI needed to obtain a rating and submit SEC filings.
It is essential to ensure funding at all times, keeping within approved investment limits. It was decided to eliminate all intercompany loans between Honeywell and the spin-offs, before establishing new intercompany loans according to funding needs for both businesses.
New FX risk management processes required separate exposures and hedges from the new entities, with LEIs sought and post-spin EMIR reporting capabilities required for both. It was decided to stop creating internal hedges with Honeywell entities, instead setting up external hedges or internal hedges within the spin-off scope.
All corporate guarantees impacted by the process were listed. It was decided to recall/renew Honeywell corporate guarantees at the spin-off date in order to exclude the new entities.
A new spin-off head office was formed to issue corporate guarantees for spin-off banking partners. A list was created of all bank guarantees issued by mixed entities, to see whether guaranteed contracts related to Honeywell or the spin-off. Then, trade lines were established, allowing GTX and REZI to issue bank guarantees.
As the first corporate to use eSignatures with Barclays in EMEA and with J.P. Morgan in the US, it acted as a catalyst in accelerating its adoption amongst corporates globally.
The team also leveraged early adoption of banking online KYC portals, such as Barclays’ BOOST platform. During this pressurised period, it had direct access to Barclays’ developers, working closely on improvements, helping to deliver a more robust and user-friendly system. The feedback resulted in weekly patches being pushed to the platform, allowing treasury to operate more effectively as it underwent onboarding with the bank.
Cloud technology was adopted, allowing the sharing of important trackers, ensuring all stakeholders were kept abreast of progress and for relevant information to be distributed. As a global project, the ability to access real-time information allowed treasury to be very agile, operating across time zones.
Relationship management with key banking partners proved vital. The workshops held with these banks helped all parties stay aligned on every aspect of the project. In being able to either pilot new technologies or be early adopters it gave the banks invaluable live client experience in which to test their tools.
Given Honeywell’s strong relationships with its banking partners, cross-banking group project teams were set up to ensure that cross-border/cross-bank sweeping was established and that all partners worked to achieve a common goal. It paid off. With 100% cash-visibility from day one, across all bank accounts, it was possible to clearly segregate what cash belonged to Honeywell, and what belonged to GTX and REZI (the adaption of the Quantum TMS further allowed instant reporting and the isolation of key data at a Honeywell, GTX or REZI level).
This monumental reorganisation let Honeywell place a greater focus on its four remaining divisions, which was a key strategy of its CFO and president. The speed of execution allowed both businesses to stand alone successfully within the published timeline.
The whole process leveraged the expertise of the team, rather than outsourcing it to consultants. Many balls were in the air at the same time, but due to the commitment and expertise of the team, none were dropped.
This impressive feat demonstrates how treasury brings real value to achieving and supporting global business goals. It also reveals the level of skill and involvement required to be the Adam Smith Awards Top Treasury Team 2019.