FSN: Hyperion helped ABB overcome liquidity crisis

Hyperion helped ABB overcome liquidity crisis

4th September 2006
Hyperion said last week that its Strategic Finance software, a financial modelling application, helped ABB, the provider of power and automation technologies to overcome a major liquidity crisis. Hyperion Strategic Finance enabled the modeling and planning of this highly complex business and provided ABB's stakeholders with renewed confidence in its financial position after a liquidity crisis in 2002/2003 was triggered by asbestos litigation.

As a result of the litigation against Combustion Engineering, an acquisition from the early 1990s, ABB lost its investment-grade credit rating and as a consequence, its line of credit. This problem was aggravated by the fact that ABB had been using shorter-term commercial paper. When these debts matured, ABB was forced to refinance at a higher cost than had it not lost its investment-grade rating.

“Faced with a major liquidity crisis, we urgently needed to recapitalize our balance sheet for 2003,” said Barton Champness, head of Financial Planning at ABB Group. “A significant challenge was the fact that our existing financial software tools weren't really up to the task. When we looked at the tools available on the market to help us, we found Hyperion Strategic Finance was the only product capable of handling our simulation requirements. There was really nothing else comparable.”

Hyperion Strategic Finance is a financial modeling application that lets executives understand the full financial impact of alternative strategies on a company's long term performance. It saves valuable time spent on building, maintaining and training finance employees on cumbersome spreadsheet modeling tools.

“We were able to overcome this crisis after Hyperion Strategic Finance allowed us to confidently run simulations on our capital structure and cash flow positions,” said Champness. “By presenting these results to creditors and rating agencies, we were able to renegotiate our line of credit. The use of Hyperion Strategic Finance in preparing the ABB group financial plan was thus instrumental in providing assurance to stakeholders of our future cash generation and liquidity. What also impressed us about Hyperion Strategic Finance was that the projected results from our 2003 simulation were extremely accurate as compared to the actual results that followed. For example, actual net income for the group in 2005 was within 3% of the projection we had determined as part of the simulation we ran in 2003!”

“The bottom line is that we wanted to get our investment grade rating back in 2006, which is exactly what we have achieved,” Champness continued. “Hyperion Strategic Finance was and continues to be an important part of our turnaround. As we plan and make acquisitions, we can evaluate the impact a portfolio of deals might have on the group's credit statistics. We can thus protect our recently regained investment credit rating. The solid underlying logic of Hyperion Strategic Finance provides us with confidence in the decisions we make based on these models. It would have been much more difficult to achieve what we have without this software.”

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