Why CFOs and Treasurers Should Consider Debt Compliance Software
May 14, 2017
Doug Sabanosh

Did you know many CFOs sign the quarterly certificate without a process that confirms and documents the compliance with all of the agreements’ covenants? It’s true. And given the high probability of a covenant violation for less than investment grade companies, that’s scary business since a default can devastate a company and ruin lives.

If a less than investment grade company does not have a thorough debt compliance process, which at a minimum, must include a comprehensive covenant checklist covering all of their agreements, there is a gap in their internal control framework that could lead to being cited by auditors for a SOX deficiency or material weakness.

It’s no secret, debt compliance is an arduous task. Whether it’s the vast number of complex covenants and ever-changing regulations, or it suffers from chronic procrastination, the reality is, 99-percent of debt compliance is retaining control of the many moving parts in the process. Yet, many companies today do not have a debt compliance process in place to fully understand the agreements for the quarterly CFO Certification Letter.

Partially a consequence of the good old days of “cheap and easy credit,” many companies have limited debt compliance processes that focuses are a limited number of “headline” covenants including the financial covenants. While the very nature of debt agreements – they’re complicated and voluminous – calls for process implementation, few companies have the time or expertise to spend the man-hours setting up rock-solid processes for the quarterly and annual debt compliance responsibilities.

Why does this matter? For many companies today, the most important financial imperative is keeping their credit facilities available and the best possible terms. Moreover, technical defaults can lead to high waiver and amendment fees, increased spreads, and imposition of onerous new conditions – often resulting in legal fees exceeding $300,000. Ultimately, this can lead to the exiting of the CFO and other

Through more than 40-years of experience in the financial and treasury c-suites, the Debt Compliance Services founders have devised a system that reduces the probability of an unexpected default by 90%. Why? Because technical default is controllable with thorough knowledge of all covenant requirements and the implementation of a comprehensive process.

Debt Compliance creates a powerful search engine that covers all debt agreements simultaneously, with contextual information, allowing for quick navigation to hone in on relevant pages and research pertinent provisions, fast and accurately. In addition, Debt Compliance Services takes care of:

  1. Reading and fully understanding your debt agreements;
  2. Creating “intelligent” digital debt agreements – allowing easy navigation through a web browser;
  3. Parsing your debt agreements into small, logical web pages with hyperlinks to all agreement sections, cross-references, and defined terms;
  4. Defining your agreement text with linked terms – allowing easy navigation to section text or term definitions, with a listing of the other clauses where the term is used.
  5. Inclusion of “commenting” and “file upload” capabilities allow for the sharing of and storage of important information.

Debt Compliance Services pricing can be capitalized and the system can be implemented in under 60 days. Retain control of your debt compliance process and eliminate the domino effect.