The lender quoted a prepayment premium. The contract said the premium was zero.

The situation

A group had been shown a study promising a substantial annual saving from restructuring its debt. Part of the program had already been executed. The finance lead needed a number she could take to the board — and needed it to survive scrutiny.

What the numbers showed

Rebuilt from the loan agreements rather than from the study, the promised saving decomposed into three layers, each smaller than the last: the headline figure compared an old rate in local currency against a new rate in dollars, on a full balance that was already amortising. Correcting for amortisation cut it by more than half. Bringing the currency exposure into the calculation — the replacement funding was in dollars, the revenue was not — cut it again.

Separately, the group held four guaranteed-credit facilities priced between 18% and 23% a year, and had the liquidity to retire them. The lenders quoted early repayment at make-whole rather than at par, adding a premium to the outstanding balance.

That premium was where the real money was, and it turned on a single clause. The contract required remaining flows to be discounted at the contracted rate. Because the contracted rate sat above the rate the client’s own liquidity was earning, discounting at the contracted rate produces a present value at or below the outstanding balance — the premium is structurally zero, not negotiable-down but absent. Priced at make-whole, retiring the debt was roughly NPV-neutral; priced at par, it captured the full spread.

The decision

The clause was put to the lender directly. It conceded to par.

What changed

The group retired expensive debt at the balance rather than at a premium, released personal guarantees, and reduced leverage ahead of an acquisition. The board received a savings figure roughly a quarter of the one it had originally been shown — and one that would survive being audited.

What this engagement was not

Not a tax opinion, and not a recommendation on the currency position, which was flagged separately as an open exposure rather than a source of savings.

Anonymised at client request. Figures are stated as ranges or ratios where absolute values remain commercially sensitive.