TMS Transformation at STMicroelectronics

by Giuseppe Amodio, Head of Financial Risk Management, STMicroelectronics

The treasury activities of STMicroelectronics (ST) are centralised at its headquarters in Geneva, Switzerland under the responsibility of the Corporate Treasurer. Regional Treasury centres are located in Singapore (which covers the entire Asia Pacific and Greater China operations), France, Italy and United States.

As a result of its global activities, STMicroelectronics is exposed to financial risks, the most major of which are foreign exchange exposures and interest rate mismatches. ST’s revenues are mainly in USD (the primary currency in the semiconductor industry) with 40% of costs in EUR. Due to its industrial and marketing activities, ST also has some limited exposures to other currencies, especially SGD and CNY.

In anticipation of evolving treasury needs, we looked for a TMS with sufficient 'headroom' to accommodate our potential future requirements.

ST’s interest rate risk exposure arises from the mismatch between its cash investments, which is invested in floating rate instruments, and its fixed financial liabilities. The main fixed interest rate liability is the outstanding 1.50% 2016 convertible bond. ST has also floating rate liabilities in USD (mainly European Investment Bank’s 8 year amortising R&D loans) and EUR (mainly the 2013 Floating Rate Note). Part of the fixed interest liabilities have also been swapped to floating rate and hedged with fixed assets to further reduce the assets and liabilities mismatch.

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