Companies finance themselves with both debt and equity. When a company funds itself by means of, for instance, syndicated loans from banks or through bonds, the focus and interest of these stakeholders will be slightly different than those of the shareholders of the company. Debt IR therefore focuses on the debt service capacity of the company predominantly.
Debt IR (generally together with Treasury) will also deal with credit rating agencies, which are also focused on the debt servicing capacity of companies.
Companies can also opt to go directly to the markets to attract funding, rather than to banks, as:
- it’s a deeper pool of capital;
- generally companies can borrow on better terms.
Debt investor contacts
Debt IR therefore entails:
- maintaining relationships with debt investors (i.e. bond holders);
- providing information – although fully aligned with Equity IR - which is focused on the debt servicing capacity of the company (both regarding interest and principal).
Sometimes a conflict between shareholder and bondholder interests may occur, for example in the situation that a company makes a strategic acquisition financed wholly by debt. The IRO will need to address the two audiences separately with different focal points (strategy, growth and EBITDA development for shareholders, cash flow and debt servicing capacity for debt holders).