Crafting an effective Debt Investor Relations program
Most publicly listed companies nowadays recognise the importance of shareholder engagement and dedicate an Investor Relations (IR) function to support these initiatives. In most cases, IR activities are predominantly centred on equity investors but what many companies, as well as IR professionals, tend to overlook is that there is another important aspect of IR – engaging one’s debt investors.
Debt IR covers a range of suspects such as company bondholders, lenders, rating agencies, institutional credit investors, and fixed income analysts. Unlike equity shareholders, debt investors do not have direct influence on a company’s ownership or business operations. At the same time, they too should be viewed as significant stakeholders as they not only determine a company’s creditworthiness but are also an essential source of capital funding.
A common misconception about debt IR is that it should be left solely to the treasury team. However as with IR for equity investors, debt IR is more than just being able to understand the technicalities behind fixed income financing. It is also about managing relationships and broadening investor access. As such, we explore below a few best practices that go into building an effective Debt IR program:
Develop a formal disclosure policy: It is important to feed debt investors with accurate and timely information so that they may make informed decisions. Maintaining a transparent approach through regular and open dialogue ultimately allows a company to achieve fair value. Methods of communication similar to that of equity IR can be applied and companies can aim to demonstrate commitment towards ensuring a track record of reliable debt repayment.
Proactive vs reactive communication: Another method to engage one’s debt investors is to organise debt investor presentations, conferences or conference calls. IR professionals can also conduct non-deal fixed income roadshows to meet with strategic debt investors. By actively reaching out to investors, companies can communicate their key messages to a targeted audience in order to build a convincing debt capital market story.
Tailor information around the appropriate issues: Debt investors generally focus on different aspects of a business as compared to equity investors. For example, instead of focusing on financials such as return to shareholders, debt investors care more about a company’s funding strategy, liquidity and credit ratings. At the end of the day, debt investors want to be assured that a company has the ability to repay their loan at the specified time and rate. Hence it is important to display a company’s competencies when it comes to growing earnings, managing debt and generating cash flow.
Dedicated section for debt investors within the IR website: This page should at the very least cover the basics such as available credit facilities, ratings profile, debt investor presentations and Q&A. This information will enhance debt investors’ understanding of the company’s strategy and help to address queries regarding M&A financing, outstanding financial debt and financial position.
At the end of the day, not every company issues debt. However, when used, debt IR should be an integral component of a holistic IR program that focuses on providing quality information to instil confidence in their debt investors.
Stephanie is a Senior Associate at Financial PR Singapore