Prager is at the forefront of developing and implementing client-specific debt policies which may incorporate parameters for liquidity, derivatives and risk management. Similar to investment policies, a formal debt policy serves as the governing liability management document for an institution and reflects its specific approach to debt, capital planning, institutional mission and financial goals.
A debt management policy becomes an important strategic and governance tool to align stakeholder interests around debt financing and risk exposure. Prager has extensive experience developing comprehensive policies that provide management with the appropriate flexibility to make capital structure decisions as they relate to risk capacity, risk tolerance, risk allocation and risk management.
We typically work closely with our client's governing board and senior management as we assist in building a debt policy for each client from the ground up. The Firm also provides guidance and recommendations for changes to debt policies already in place. Debt policies often include a selection of core ratios and an approach to liquidity management, derivatives and other complex structures. They reflect strong, thoughtful management and are viewed by the rating agencies as "best practices." In addition, a strategic and deliberate process of developing a debt policy can facilitate internal communication, effect changes in procedures and improve communication with the governing board. We also continually monitor compliance with debt policies and evaluate debt capacity within given institutional risk parameters.