Spotting Opportunity in a Crisis

CA Technologies’ Jim Hodge improved the company’s ratings and revamped its global cash management.

Jim Hodge is one of those guys who sees the glass as half full. He joined CA Technologies as treasurer in the fall of 2007, after serving as assistant treasurer at AT&T. That meant Hodge arrived in time for the financial crisis and stock market crash, but he saw the crisis not as bad luck but as a challenge and an opportunity.

When the crisis hit in 2008, Hodge and the top managers of New York-based CA, an IT management software and solutions company, decided to bolster the company’s credit profile by moving it from a junk rating to investment grade. That meant reducing CA’s leverage by more than $1 billion—no small task for a company that had only $4.2 billion in sales that year.

“We decided to retire our senior debt,” Hodge recalls. “We actually bought back some of our debt early between 2008 and 2010.” Over that period, he says, the company paid off a maturing $460 million note in cash. It refinanced a $500 million note and paid off a $750 million credit facility by issuing $750 million in new debt.

“2008 was not a great time to be in the credit markets,” Hodge says, “but with the support of senior management and the board, we began to pay down our debt, and increased our margin from the high 20s to 34% and raised our debt rating to BBB+/Baa2.”

Hodge, who helped design the plan for raising the company’s ratings, says he got in touch early with the rating agencies and worked with them to regain their confidence in the company.

It helped, he concedes, that CA Technologies has been “blessed by high cash flows.”

Still, Hodge spotted a challenge. “I found the company’s cash management to be quite decentralized,” he says, with each of its 40 operations worldwide managing its own cash. Hodge instituted a system of pooling, including regular sweeps of cash, for the euro and sterling areas. He also set up notional pooling for countries outside the euro and sterling areas, such as Switzerland, Japan and the Nordic countries. 

“We measure everything in euros,” he says, “and it has been working very well, allowing us to handle working capital requirements in each country.”

Hodge keeps tight controls over the cash in each country, reviewing all investments himself on a daily basis. “You want to know where all your children are,” he laughs, adding, “We’re still working on standardizing all the systems.”

Hodge is not only a treasurer and corporate controller—a title he added earlier this year—but a teacher. He holds a Ph.D. in economics from the University of Chicago and somehow finds time to spend one day a week teaching courses in graduate level microeconomics and math for economists at New York University.

“I teach more as an avocation,” Hodge says. “I find that teaching complements my corporate work. It keeps me sharp and makes me a better treasurer.”

 

See Treasury & Risk’s 2012 100 Most Influential People in Finance list here.

See a slideshow of the finance pros on this year’s list here, and complete coverage of the list here.

 

 

 

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