Corporate Finance for a Group with Assets in Several Countries

A group with operating companies in one country and property in another is rarely financed as a group. It is financed the way it grew: transaction by transaction, country by country, bank by bank. Each acquisition brought its own loan, each subsidiary built its own local banking relationship, and each lender formed its own partial view. Years later the result is a group that is financed everywhere and understood nowhere.

Corporate finance, properly practised, reverses that exercise. It starts from the group, not from the asset that happens to need money this quarter. Which entity should borrow, against which cash flows, with what security, from which kind of lender: these are group questions. Answering them at the level of a single asset produces decisions that are locally sensible and collectively wrong, and the cost of that only becomes visible the next time the group needs to move.

What financing asset by asset actually costs

The cost rarely shows on any individual loan. Each local bank prices what it can see, and what it can see is one entity, one asset, one income stream in one jurisdiction. The strength that sits elsewhere in the group contributes nothing to the analysis, because it is not in the file. The rental income in another country, the operating cash flow of a sister company, the unencumbered asset held two entities away: none of it exists for the credit committee. The borrower is judged as a fragment and priced as a fragment.

Security is the second cost. When every financing is negotiated alone, every lender takes the security in front of it, and often more than the transaction strictly requires, because it cannot see what else protects it. Over time the group’s assets end up pledged piecemeal to lenders who never coordinated with each other. Cross-default clauses accumulate quietly. A group that later wants to sell one asset, or refinance another, discovers that the decision is no longer entirely its own.

The third cost is calendar. Loans raised opportunistically mature opportunistically. Nobody designed the maturity profile, so nobody noticed that facilities in two countries fall due within the same period, or that the group’s refinancing risk is concentrated in a single lender whose appetite may have changed by then. Each loan, examined alone, was reasonable. The portfolio of loans is not, and no single banker in the structure is responsible for the whole.

The bill arrives in full the first time the group attempts something that crosses its own internal borders. A disposal that needs one lender’s consent because of a cross-default nobody remembered. A dividend that cannot be paid because a covenant in another country forbids it. A refinancing that stalls because the incoming lender wants security the outgoing lenders already hold between them. At that point the group discovers that its financing was never designed, only accumulated, and that unwinding an accumulation costs more than designing it would have, because every lender whose consent is now needed knows exactly what that consent is worth.

Underneath all of it runs the opacity penalty. A lender that cannot see the whole group assumes the worst about the part it cannot see. That assumption is either priced in from the start or it surfaces late in the process, as a request for more security, a personal guarantee, or a decline. Groups that are financed piecemeal pay for their own opacity, usually without ever seeing the invoice.

The analysis that starts from the group

Before any conversation with any lender, three things need to be established: how the group is actually built, what it can actually repay, and what it can actually offer. This sounds elementary. In practice, groups that have grown across borders often cannot answer the three questions quickly, in writing, in a form a credit committee can use, and that inability is the real obstacle, long before pricing or appetite enter the picture.

Structure first. Who owns what, through which entities, in which jurisdictions, and why. Where cash is generated and where it accumulates, which is rarely the same place. Which company has operations and substance, and which is a holding vehicle. None of this needs to change for the group to be financed. All of it needs to be visible, because the lender will reconstruct it anyway, slowly and with less goodwill, if the file has not done it first.

Repayment capacity comes next, and it has to be read at group level and at entity level at the same time. A group can be comfortably able to service its debt in aggregate while the specific entity signing the loan is not, because the cash sits in another country and moving it has consequences. A financing structure that ignores this fails in a predictable way: the loan is granted, and the first payment date becomes an exercise in improvisation.

Assets last. Which ones are unencumbered, which are already pledged and to whom, which produce income and which consume it. The point is not to catalogue everything the group owns. It is to decide, deliberately, what the group is prepared to offer as security and what it intends to keep out of any lender’s reach, before a lender makes that decision on the group’s behalf.

Comparing the routes before committing to one

For a multi-country group the realistic menu is wider than the house bank suggests: direct bank debt, specialised intermediation, real estate debt secured on the property, corporate financing raised against the business itself, and private capital. Each route reads the group differently, prices a different risk and imposes different conditions. Choosing among them is the actual financing decision, and it deserves more rigour than it usually receives.

The comparison has a fixed grammar. What the money is for. Which cash flows will repay it. What security each route will demand, and what that security costs the group in future flexibility. What arrives attached: covenants, guarantees, information duties, restrictions on distributions. A route that looks attractive on price and heavy on conditions is frequently the worst on offer, because conditions outlive the drawdown and shape every decision the group takes afterwards.

The routes are not mutually exclusive either. A group may sensibly raise real estate debt against a stabilised, income-producing property while funding its operating companies through corporate facilities, keeping the two packages of security deliberately apart. What decides the mix is the shape of the group itself: where the value sits, where the cash flows, and where the group intends to grow next.

Part of the comparison is the choice of borrowing entity, and it is a genuine choice rather than a formality. The company that owns the asset, the local operating company and the holding above them can each, in principle, sign the loan, and each choice moves the security, the covenants and the path the cash must travel to reach the lender. A lender wants its borrower close to the cash that repays it and close to the asset that secures it, and where those two sit in different companies the structure has to connect them: guarantees, pledges, or a different borrower altogether. Deciding this after the term sheet arrives means deciding it on the lender’s terms.

What does not work is the common method: approach whichever lender answers first and let that lender’s product define the structure. The group then adapts itself to the financing instead of the financing to the group, and every future transaction inherits the distortion. Structures built this way are recognisable years later, and they are expensive to unwind.

One group between the Netherlands and Spain

An entrepreneur held operating companies and real estate assets in the Netherlands and Spain, and needed financing. What he did not have was the answer to the first question: whether to raise bank debt, asset-backed financing or private capital. Each option existed in some form. None of them had been examined against the group as a whole, and each conversation started from a different partial picture.

Montclare analysed the corporate structure, the group’s repayment capacity and the assets available, then compared the routes on their merits: direct bank financing, specialised intermediation, real estate debt and corporate finance. The comparison was run against the group’s actual shape rather than against any lender’s product sheet, which is what allowed the routes to be ranked instead of merely listed.

The review also covered the intragroup loans, the shareholders’ contributions, transfer pricing and the deductibility of interest. Not as a tax exercise: the detailed tax analysis belongs with the group’s tax advisers. It was covered because a lender reading this group’s accounts would meet those positions on page one, and a file that cannot explain them coherently invites the credit committee to supply its own explanation, which is never the generous one.

The outcome was a defined financing structure, a file prepared for financial institutions, and a substantially reduced risk of rejection or delay. Nothing about the group was redesigned to please a lender. What changed is that the group could now be read, and a group that can be read can be financed on its merits rather than on a fragment of them.

A file that shows one borrower

The practical output of the whole exercise is a single credit file that presents the group as one borrower. It contains the ownership chain down to the beneficial owners, the cash flows and how they connect across entities and borders, the intercompany positions and their documentation, the assets and their encumbrances, the proposed borrowing entity and the reasons for choosing it, and the security on offer. A lender that receives this does not have to reconstruct the group, and a lender spared reconstruction gives faster and better answers.

The file changes the tone of the conversation as much as its content. It tells the lender that the group knows itself, that the questions a committee will ask have already been asked internally, and that the answers will be consistent wherever the lender probes. Consistency is the quality credit officers reward most, because inconsistency is what they are trained to hunt.

The file also fixes what the piecemeal years never had: a maturity calendar designed on purpose. Refinancing dates spread rather than clustered, no single institution holding a concentration of the group’s debt, and the next facility negotiated while the current one still has life in it. None of this appears in any individual loan agreement, which is exactly why it has to be held at group level, by someone responsible for the whole. A group that manages its maturities as a portfolio walks into every renewal with alternatives, and alternatives, not relationships, are what discipline a lender’s terms.

Finance the group, not the loose asset. The asset still gets financed, but as part of a structure that was designed once, on purpose, rather than accumulated by accident. That is the difference between a group that raises money when it must and a group that can choose its lender, its timing and its terms, because it can be seen whole.

Montclare does not act as a lender. It structures transactions, prepares the file and coordinates financing with authorised institutions.