Treasury Management

Throughout its history, the Company has been recognized for its solid financial position, which has been the result of an ongoing quest to diversify its funding sources and seek sustained and balanced growth with effective risk management.

As part of our financing policy, Tanner Servicios Financieros S.A. aims to maintain a liquidity level that allows us to withstand potential unforeseen scenarios of financial distress. This policy also establishes the matching principles that guide the Company’s asset and liability management, and our exposure limits to different currencies and financial instruments. Tanner’s financing policy includes specific guidelines for structuring its liabilities, which are formulated based on market analysis and balance structure (in terms of maturities and diversification).

In terms of its investment policy, Tanner is always looking for the best investment alternatives that allow us to obtain the maximum risk-adjusted return on surplus resources, while maintaining sufficient cash to cover short-term cash needs. To accomplish this, Tanner conservatively invests in mutual funds, repos, term deposits and bonds.

Given the nature of our financing strategy, during the normal course of our business we have exposure to different currencies, which are hedged to minimize the exposure of the balance sheet to market volatility, both in interest rates and currency values. Similarly, our exposure to inflation is managed in a fairly conservative manner, seeking to maintain a healthy balance in terms of our UF exposure.

In terms of liquidity management, as of the end of 2017 we had a conservative mismatch in the duration of our assets and liabilities, whereby our financial liabilities, i.e. excluding equities, on average, had a duration that is 0.56 years higher than the average duration of our assets (average duration of our liabilities and assets is 1.61 and 1.05 years, respectively). This conservative mismatch gives us a financial buffer against movements in interest rates. It is worth noting that the average duration of our assets and liabilities is constantly under analysis with the objective of seizing every market opportunity available during periods of high and low interest rates.

As of December 31, 2017, our financial debt stood at Ch$ 815,989 million (~US$ 1,327 million), comprised of Ch$ 63,336 million (~US$ 103 million) in commercial paper, Ch$ 222,359 million (~US$ 362 million) in loans with local and international institutions, Ch$ 496,783 million (~US$ 808 million) in bonds and Ch$ 33,510 million (~US$ 54 million) in other forms of financial debt, of which 87% corresponds to debt agreements and the remaining 13% are obligations under forward contracts. Meanwhile, cash and cash equivalents reached Ch$ 84,636 million (~US$ 138 million), resulting in a net financial debt position of Ch$ 815,989 million (~US$ 1,327 million).

During 2017 we were an active debt issuer as we took advantage of opportunities in both local and international debt markets. In the local market, we placed a 1.5 million UF 4-year bond with a spread of 186 points, 72 points lower than a similar issuance completed in 2016, and a program of commercial paper US$-denominated (US$ 80 million) were authorized by the regulator, which made us the only active issuer of this type of instrument. Also, for the second year in a row, we issued a bond in the Swiss market with a 3-year term and a value of CHF 100 million (~US$ 100 million), managing to reduce the spread by almost 100 points, to 178 basis points, vs. last year’s issuance.

Thanks to the aforementioned debt issuances, the Company ended 2017 with a diversified funding structure comprised of: seven bond issuances outstanding in the local market; three issuances in international markets, one issuance in USA (which expires in March 2018) and the other two in Switzerland (expiring in 2019 and 2020 respectively); credit facilities from Chilean and foreign banks; and long-term loans from leading international institutions.