Funding diversity and working capital efficiency are strategically critical to address intensifying capital structure pressure, writes Shoaib Yaqub, Global Head, Capital Structure Advisory, Standard Chartered.
The Covid-19 pandemic and associated supply chain stress of last year have put corporates under pressure to reinforce balance sheets and squeeze everything they can from the assets at their disposal.
This has paid off: Standard Chartered’s bottom-up analysis of 700 constituent companies in S&P’s Global 1200 Index over the past five years shows that by the end of 2020, seven of the 16 sectors assessed had their best year since 2016 in terms of working capital efficiency. By September 2021, 12 sectors were at their strongest.
This is impressive. But our analysis also showed that pressing investment needs and the impact of Covid have put pressure on credit profiles, as indebtedness has peaked for 13 of the 16 sectors – with many sectors continuing to deliver higher shareholder returns. In this environment, the capital structure challenges facing C-suite executives are only likely to intensify.