Even so, the treasury team soon found itself at the center of the company's efforts to arrange a $1.5 billion emergency financing to begin to address the imperative to restore service and other liquidity needs. Everybody in treasury wanted to help get the operation back on its feet, and by the end of the first week, two-thirds of the staff were already calling in to see what they could do to help. But the situation was about to become even more challenging: A rise in natural gas prices that began prior to Katrina worsened in the storm's wake, requiring significantly more cash to fund purchases of natural gas to fuel generating stations and significantly more bank credit to support the collateral requirements of Entergy's northeastern nuclear businesses. A few weeks later, Rita would rip into the company's Louisiana-Texas service area, adding to the liquidity crunch.

Prior to the hurricanes, the company's strategy was to retain minimal working capital, making external sourcing vital to any recovery plan. It was determined that financing efforts would be guided by two goals: First, the company would strive to maintain its credit ratings at current levels, and second, any financings had to be callable to give the company the flexibility to take advantage of more attractive refinancing alternatives or respond to a reduction in cash needs. "We were determined not to do financings that would be restrictive or have covenants in them that wouldn't have been there before the storm," says McNeal.

The overall financing plan had several parts to meet the needs of various subsidiaries. The company first reached out to its bankers at Citigroup and negotiated a $200 million private placement "bridge" bond. Within the next two months, a series of bond financings totaling $500 million were sold and a $1.5 billion revolving credit facility was put in place, with an identical pricing grid to Entergy's pre-Katrina facility, to offset potential negative mark-to-market exposures from rising gas and power prices. The company increased its equity with a mandatory convertible offering valued at $500 million. "The biggest challenge in these transactions was getting stability with the rating agencies where they could affirm a rating and we could go to the market," explains assistant treasurer Frank Williford. Treasury made sure someone was always on hand to answer rating agency questions and provide details.

It took eight months for all treasury employees to return to Entergy's New Orleans offices, but it was the plan that the team put into place in those first eight weeks after the hurricanes that helped put the company on a more stable footing. Even though the company was initially put on a negative credit watch by the rating agencies and its smallest subsidiary went bankrupt, the parent company managed to maintain its ratings, and its debt and equity offerings were well received by the market. The Entergy team gives credit to its relationships with its entire bank group, led by Citi, which helped find the best financing solutions in the fastest amount of time. "Every institution in our bank group contacted us to offer their assistance after Katrina," says McNeal. "Knowing they would stand by us gave us the confidence to aggressively approach the captial markets."

SILVER AWARD WINNER

Toyotal Financial Services

In 2004, following a period of rapid growth, Toyota Financial Services (TFS)

faced a substantial increase in its annual funding requirements. Its treasury staff

knew that seeking added liquidity through its traditional capital market sources would come at a steep cost, despite the company's triple-A credit ratings. And since senior management had just requested that treasury work to lower the company's overall cost of funds, treasury had to start thinking out of the box.

The solution came through a program of expanded issuances in the structured finance market, a market dominated by issues of federal agencies like Fannie Mae and Freddie Mac. "The difficulty that we had to overcome was the fact that accounting and tax requirements associated with structured trades are more complex, especially for a corporate issuer like us," says senior financial analyst Bill Pang. TFS's treasury established a cross-functional team, including members from accounting policy, operations, risk management, legal and tax to analyze and approve new structured opportunities. These transactions often involved complex embedded derivatives and were swapped back to USD three-month LIBOR to avoid incremental currency, rate or structure risk. To achieve hedge accounting under SFAS 133, many of the structures required the use of "long haul" accounting, under which the relationships between the hedged item and the derivative is documented and continuously monitored, instead of "short haul" techniques. From 2004 to 2005, as Toyota Financial launched its structured notes program, the group's cost of funds declined by 7.2 basis points, adding some $23 million in shareholder value. From 2005 to 2006, funding costs further improved by another 2 basis points and $13 million more in shareholder value was created. All the while, the company maintained full accounting compliance.

BRONZE AWARD WINNER

Intel Corp.

Since the early 1990s, Intel Corp. has enjoyed healthy cash balances and strong cashflow generation, requiring the company to issue almost no debt. In fact, in recent years Intel has financed billions worth of stock buybacks entirely from operational cash flows. So, when its bankers at JPMorgan Chase approached it with a proposal to use inexpensive debt to finance stock buybacks, executives expected to give it a pass. But Intel's treasury saw an opportunity to structure a convertible contingent debt offering that could create a positive net present value (NPV) under most circumstances, while exposing the company to minimal stock price risk. The centerpiece was an IRS ruling on contingent interest debt payments and precedent transactions that allowed Intel to claim a tax deduction based on the "comparable yield" of a fixed-rate, non-convertible debt instrument. A portion of the proceeds was used to buy enough shares as a hedge, in the event of a conversion that required shares to be issued. "Others looked at raising cash for buybacks, but we looked at this as a pure NPV transaction," says Intel Treasurer Ravi Jacob. "We want to do smart transactions based on the strength of our balance sheet and our name that will add value for our shareholders."

Treasury made numerous changes to the proposal. They reduced the "break-even" stock price–a worst-case scenario in which the company would have to repay the IRS taxes on the difference between the bond's adjusted issue price and conversion value at termination–from $18 to below $10. The maturity of the issue was also lengthened to 30 years. Last December, the $1.6 billion debt issue was heavily oversubscribed during pricing and a steady stock price allowed the company to buy back shares with zero premium. Intel estimates the NPV of the deal to be between 20% and 25% of face value.