Last month, Albéa Group's Finance and Treasury Director, Olivier Bouillaud, sat down with treasury advisory firm Redbridge to explain why the company decided to move away from its incumbent banking partner in 2020.
Albéa employs more than 10,000 people across 31 industrial sites in 13 countries in Europe, North America and Asia and has annual sales in excess of US$1bn.
The group’s finance treasury function is organised around a three-person central treasury team in Paris, which relies on local relays in Europe, India, China, Indonesia and in the US. Each financial director has a certain level of autonomy and the ability to consult local banks with the central treasury department playing a supporting role by providing knowledge and experience.
Albéa has four cash pooling schemes - one each in Europe, the US, China and Indonesia - and a factoring programme in Europe.
The group has five core banks with global capabilities, but Bouillaud admitted that it is working with too many banks (approximately 30) around the world and that its bank account structure could be simplified. The target is to have two local banks and one international bank in every major geographical area in which it operates.
In the US - where Albéa makes a quarter of its turnover - it only had one bank. “We were quite satisfied with the quality of the cash management services, but the relationship had become stale with respect to the functioning of our asset-based lending,” said Bouillaud. “This collateralised financing (worth in excess of US$60m) had many constraints. We felt like we had a bank whose team from time to time failed to understand our concerns.”
The company decided to repay the debt, pay the break-up fees, and put inter-company financing in place, which triggered a termination letter from the bank. The original 120 deadline for leaving the relationship was subsequently extended by 60 days to facilitate the selection of a new banking partner.
The preference was for a US bank compatible with its banking communication tool and TMS that could provide a broad range of high quality services at a fair price. Redbridge supervised the tender process.
Within three months, Albéa had found a new US banking partner for its cash management operations.
All changes were deployed gradually. Once the account was open, information was circulated to clients and they were called to inform them of the change of bank. Apart from electronic cheques, the full range of bank services was reinstated and connectivity to the group’s treasury tool was established.
Following the sale of several assets in the US, the introduction of new financing was no longer an urgent matter. The group switched from asset-based lending to factoring, which Bouillaud described as a lighter, simpler and less expensive alternative.
None of the banks or lenders it met during the RFP process offered it a factoring programme, so the group chose to work with one of its existing factoring partners in Europe.
“During a conversation with a French factorer, we learned that it was possible to extend the geographic scope of our European factoring programme to the US,” said Bouillaud. “This programme had the advantage of being deconsolidating and offered much better terms and conditions than securitisation.”
In order to extend the factoring programme in the US, it had to be adapted to American specificities for financing and deconsolidation. However, Bouillaud observed that the cost of the group’s financial resource in the US has still fallen considerably.
Looking ahead, Albéa’s treasury objectives include optimising its treasury architecture, aligning internal signatory procedures and operating methods, and activating the new modules of its treasury tool such as netting, cash forecasting, cash pooling, and debt management.