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Palm Internal - IC Loan Workbook Walkthrough - 2025-12-02

Metadata

  • Date: 2025-12-02
  • Company: Palm (Internal)
  • External Participants: None
  • Palm Participants: Emma, Gurjit
  • Type: Internal Discussion
  • Domain Areas: IC Loans
  • Recording: None

Summary

Context

Internal knowledge-sharing session where Gurjit walked Emma through how IC loans were managed at Uber, including the loan agreement structure, interest calculations, and the Excel workbook used to track ~60+ intercompany loans. This provides foundational domain knowledge for Palm's IC loans feature development.

Key Discussion Points

  • IC loan agreement structure and key clauses
  • Floating vs fixed interest rates with benchmark rates (LIBOR, CDOR, etc.) plus spread
  • Arm's length principle requirement for all intercompany transactions
  • Loan tracking workbook structure: lender, borrower, currency, maturity, balance, notional, interest rate
  • Monthly interest rate updates from Bloomberg benchmark rates
  • Interest accrual and settlement process (annual settlement of accrued interest)
  • Withholding tax and thin capitalization considerations
  • Failed Kyriba implementation attempt for IC loan management

Pain Points

  • Manual benchmark rate updates - Had to pull rates from Bloomberg and update spreadsheet monthly
  • Complex interest calculations - Floating rate + spread, calculated monthly on outstanding principal
  • Loan maturity tracking - Needed conditional formatting alerts for loans expiring in 30 days
  • Withholding tax complexity - Required tax team input for rates between country pairs
  • Thin capitalization tracking - Couldn't figure out how to track debt-to-equity limits properly
  • Kyriba IC loan module was unusable - "Complete mess", no one wanted to use it, looked nothing like their workbook

Feature Requests & Needs

  • Simple loan tracking: borrower, lender, amount, interest rate, borrowed amount, interest owed, interest paid
  • Monthly report generation for accounting teams
  • Loan draw tracking with bank account confirmation
  • Maturity alerts (e.g., 30 days before expiration)
  • Interest accrual tracking and settlement workflows
  • Ability to track against notional (credit facility limit) vs actual borrowed amount

Jobs & Desired Outcomes

Job: Track intercompany loan positions and interest across multiple entities Desired Outcomes: - Minimize manual effort to update benchmark rates and calculate interest monthly - Reduce errors in interest accrual calculations - Increase visibility into total IC loan exposure by entity and currency

Job: Manage IC loan lifecycle (issuance, amendments, repayments, closure) Desired Outcomes: - Minimize risk of missing loan maturity dates requiring amendments - Reduce time spent on loan documentation and amendments - Increase ability to identify loans that can be paid down when cash is available

Job: Provide accounting teams with accurate IC loan data for booking Desired Outcomes: - Minimize reconciliation issues between treasury loan tracking and accounting entries - Reduce time for accounting to confirm loan draws against bank movements - Increase accuracy of intercompany loan reporting

Domain Insights

Arm's Length Principle: - All IC transactions must look like independent third-party agreements - Tax authorities don't recognize subsidiary relationships - treat as external - Interest rates must be reasonable (benchmark + spread like a bank would charge) - Can't have open-ended loans (no bank would do that)

Interest Rate Structures: - Fixed: Simple flat rate (e.g., 3%) - Floating: Benchmark rate (LIBOR, CDOR, EURIBOR, etc.) + spread (e.g., 1.25%) - Benchmark rates published by central banks, pulled from Bloomberg - Rate refreshes on first business day of each month for floating loans

FX Exposure Decisions: - Company chooses where to hold FX exposure: lender or borrower - Uber centralized FX exposure at lending entity (Uber NL BV) - Borrower receives and repays in local currency

Loan Workbook Structure: - Lender, Borrower, Country (jurisdiction), Currency - Maturity date (typically 3-year terms with amendments to extend) - Loan balance (actual borrowed) vs Notional (credit facility limit) - Interest rate, Interest paid, Interest outstanding - Withholding tax rates (from tax team) - Thin cap limits (debt-to-equity rules by country)

Monthly Process: 1. Update benchmark rates from Bloomberg 2. Calculate interest for the month 3. Track any new loan draws 4. Send report to accounting for booking 5. Accounting confirms bank movements match loan draws

Annual Process: - Settle all accrued interest by December 31st - Requires documentation and approvals in some countries

Action Items

  • [ ] Use this as foundation for IC Loans domain knowledge
  • [ ] Consider simple loan tracking MVP: borrower, lender, amount, rate, interest owed/paid

Notable Quotes

"In the eyes of the local tax authority of the borrower and the tax authority of the lender, these are considered loans that are not to your own company. You don't own it. It's supposed to look like a real agreement, as if you're borrowing from a bank." - Gurjit

"We try to take this and put it into Kyriba. We did go through an RFP with Kyriba to get their intercompany loan module. It was a complete mess." - Gurjit

"If you could say borrower, lender, amount, interest rate, how much is borrowed, how much interest is owed, how much interest is paid - great report to be able to send. Because most treasury teams are building these and sending these out on a daily basis." - Gurjit

Full Transcript

Them: A new chapter. New chapter. How do you. How do you want to walk through this? Like, I know this is. You just kind of want to get, I guess, like an overview kind of. Or how do you. I could go into the loans and the business side of things and what they do, what they're for and how. How they're being managed and, like, what's important or to the. Like, the actual. How are they tracked in this workbook? What's helpful for you.
Me: Yes, a short, high level overview would be good. And then I also did just like, I read through the stuff. I had, like, a few questions. Oh, man. Sorry, one second. Hello. Yep. Yep. No. Open. Thank you. It's so confusing. They say something in Swedish and then they don't understand. Whatever I feel bad about for these delivery people, but anyway.
Them: Especially this time of year.
Me: Yeah. So it was just like, a few quick ones. This sorry borrower will pay to lend interest to floating benchmark interest rate at the first business days of the current month. Sure. What is surcharge of spread on the outstanding principal amount?
Them: And surcharge of spread on the outstanding principal amount. You know what's so funny? I remember this being, like, a question every time we would, like, issue these loans of how do you do this calculation? I think the spirit of what this was was essentially it was whatever benchmark rate we choose chose so, say, for lending Euro, and we wanted to use a Riber interest rate. That would be the. The floating benchmark.
Me: Okay?
Them: And the surcharge on the spread. Was just basically, you have, you have the interest rate plus an additional, the spread, like an additional. Amount added onto it. So, like we did, 1.25%, I think, across any, any loan. It's just basically we added on a specific amount, a fixed amount to a floating amount. So you have a more of what's considered an arm's length rate. So what would a bank charge this company to lend it money?
Me: Okay?
Them: Typically, banks will use like we'll use some sort of rate, a benchmark rate, and then add a surcharge. That's where they get, where they're kind of making that, that money away, right?
Me: Okay, so third chart is this fancy name for margin or, like.
Them: Margin or margin or spread. Yeah. And again, this is specific to just this Uber one we have. Like, this could be referenced in many different ways, but essentially the idea here was whatever your interest, whatever your principal was at the end of the month, So say you owed a million dollars on this loan. And you had a rate of. At that point it was like Libor plus 1.25, which calculates to maybe 3 point something percent.
Me: Okay, so it's. But it's like one part is always fixed, and the other one is a little bit.
Them: No. So the piece here on the interest is this is specific to Uber is how we built this interest schedule. Other companies might have fixed. Others might say just floating rate. Some might say fixed plus floating. It could be a different combination based on whatever the company decides because there are other loans in the workbook that you'll see that has a fixed rate, like we said. Okay. It's a flat 3%.
Me: Okay? Yeah.
Them: So. Yeah, so.
Me: Something else. So should interest not be paid when. Due, it shall be added to the principal balance and thereafter bear interest under the touch. So does it mean that the principal increases?
Them: Yes. The borrowed amount increases. Yeah. So basically. Yeah. If I owed a million, I owed 500k in interest. I didn't pay it. And then my loan balance is 1.5 million.
Me: And then you get the remaining interest calculated on top of evil.
Them: On top of that? Yeah. There's a reason why we did this. It was a little bit more probably not the most. Probably not the most legit way of doing it, but essentially. We had a bunch of companies around Uber that had received money when we were expanding into the market. But we didn't call it anything. We didn't. The whole idea about, hey, you have to, like, designate a certain instrument for funding. Back in the Uber days, we didn't call it anything. We just literally just sent money as a wire.
Me: Ah, okay.
Them: And say we'll deal with it later. And so what basically happened is now these companies that receive the money had a payable due back to the headquarters. And we're like, okay, well, what we'll do is we'll say it was a loan, we'll backtape the loan. And then we'll say all that money we sent you was just debt, so now you got to pay it back to us. And that was our way to try to get the money back out of the country. That's not kosher. You can't really backdate it alone, right? But we still try to push for it. And there was some countries that said, well, we're never going to let you pay this money back. But we're like, okay, well, we have to still figure out how to make this happen. So what we'll do in the meantime is since they're not never going to pay us interest because the central bank doesn't allow us to make money out of there, We'll just tack it back onto the loan or whatever. It was our money at the end of the day, and we said until we could figure it out. So this is also not super common. But it's a bit of an Uber specific. Thing that we did.
Me: Yeah, sorry. Just like, do companies typically set up or use bank accounts to service ICDAP in the same currency? As the debt, or is there, like, FX effects and stuff going on here as well?
Them: Also very dependent on companies. So some companies will say, well, we want to centralize the FX exposure to the lending company.
Me: Okay?
Them: So the forward should not be exposed. They borrow a million rupees, they pay back a million rupees. FX is with whatever. Other companies flip it around. They say, well, we want the borrower to be exposed. So again, it's company by company. There's not a standard there.
Me: And then was there anything else? Why would someone do this? Lender has a way to transfer the entitlement to interest payments and principal repayments resulting from. Oh, yeah, they can transfer it to a third party.
Them: Yeah, it's more so, like, again, because these are intercompany loans, you want a lot of flexibility because you might transfer to a different entity or you might do some other fancy stuff. It's just more of a covering, because in the eyes of the central bank or the tax authorities, these loan agreements are not between the same company. Right. Like, they recognize this as truly a third party relationship, even though we know that this is our subsidiary. In the eyes of the local tax authority of the Baltmore and the tax authority of the lender. These are considered loans that are not to your own company. You don't own it. Supposed to look like a real agreement, as if. You're borrowing from a bank.
Me: Even if. It is. That doesn't make sense. But let's say the entities are both us based. So it doesn't matter. It's not just because, like, oh, the Spanish one is borrowing from the Italian one. It's regardless.
Them: Yes.
Me: Anyone. If it's, like, just. One department to another or. Yeah.
Them: They don't see it that way, right? So the same thing goes with cash cooling in a way as well. You'll hear the term arm's length or arm's length principle is quite often from tax authorities, tax teams as well. Whenever you're doing an intercompany, any relationship between subsidiaries within a company, any sort of financial transaction. It should still look as if there is no relationship between those entities. It has to be within, they call it arm's length, as in a reasonable agreement that any two independent companies would agree into. So, for example, if I lend money to. My Japanese entity. And I say to them, I'm going to give you a billion dollar loan, but I'm going to charge you zero interest for it. But you could borrow this money indefinitely and pay it back whenever you want. If I try to call that an intra company loan, it'll get shot down by this local third. Like no bank would ever do that. Right. So that's why you have things like spread and benchmark rates and specific interest rates. You build in jurisdictions and laws of where these rules apply. And you build in kind of the framework to represent this as being an independent relationship, regardless of subsidiary connection. And it's a instrument as such. It's a requirement for every kind of local country.
Me: How, how. How often would you say any of these, like, kind of clauses threaten to affect, like, is it typically the case that people just pay their dues and everything is fine?
Them: Yeah.
Me: How often do you need to, for example, like.
Them: Go to court.
Me: Yeah. Or even. Even just do something like. Slightly outside of this, like.
Them: Yeah. It's funny, right? Because again, at the end of the day, it's typically the treasury team that's running this. And at Uber here, I was on both sides of the transaction. So I was a borrower and I was a lender, and I could decide when to pay, when not to pay for go. Paying one for a week and paying late. It comes down to, again, the companies, right? They're typically going to just be okay with. What's the reason for this loan in the first place? It's a tool for liquidity management. Right? Getting money into a country or into a subsidiary with the ability to pull it back. And keeping it within arm's length. And so, in the spirit of that, if they sometimes miss an interest payment, but pay it like a five days later or ten days later, they might not charge the fee or the extra interest for it. They'll be a bit pragmatic about it. But I have seen in other companies where they are very strict on it, especially when you have. A decentralized function, meaning the treasury team is issuing the loans to the local finance teams. And if they're not paying you back, then you're saying, well, look, we have these rules in place, and we're going to penalize you for that because you're not following the rules that we've set out. I've seen that happen as well. And so, to answer your question, it again, depends on company by company. Some are flexible, some are very stringent. But in most cases I've seen the former where they're a bit pragmatic about it. They understand it's all within the same umbrella for us, realistically. So let's follow that.
Me: I understand. And then I did have a quick look at all this as well.
Them: My favorite workbook. So this is how we would track our loans at Uber. I built this kind of from scratch.
Me: Yeah.
Them: It started off with just three loans and it ended up at whatever 60 plus odd over the years or how many ever there are there now.
Me: Yeah.
Them: So for us just a high level meet and bv. The main one that you see here on the left is our in house bank, our lending entity. So to answer your question around who holds the FX exposure and that stuff, we had decided that meetin would be the one that's lending to all of the subsidiaries. And local currencies. So the subsidiary receives the currency. They pay back in that currency, and we hold the exposure at meeting.
Me: Seems pragmatic and simple.
Them: It easier, right? You centralize it in one place.
Me: Yeah.
Them: But meeting was also our cash pool header. And so all we were doing was always just trying to get as much of the money internationally into this meeting entity, and then from there you could disperse it back out through loans or through pools or whatever. But this is where this whole idea around cash optimization, our goal was how much and how quickly can we get money back into meeting bv because from there, it could then be sent anywhere else internationally.
Me: Yep. Makes sense.
Them: Yeah, but anyways. But quite simple. Lender, borrower, the country of where the loan, where the borrower sits, because this is based on that jurisdiction. The currency of the loan. When the full loan matures. So typically we did three year loans, but then we would do amendments to extend it out. But again, this is just. There has to be. You can't have it open ended loan, right? So it had to have eight end date at some point. And what we did.
Me: Yeah. And that's like it. Like no one would do an open ended intercompany loan.
Them: It's not a norm's length. Right. So no bank. If you open ended loan, there's some conditional formatting that was built in here, so anytime we were 30 days out from expiration, it would like light up. And so that would be our trigger to then issue a loan amendment to say, hey, by the way, the loan's expiring in 30 days.
Me: Cool.
Them: Do you want to pay it all off, or do you want to extend the loan by another three years? And then we have to fill out a new amendment agreement and whatever.
Me: Okay, okay. Yeah.
Them: Loan balance was how much has been borrowed on the loan, because most of these were revolving facilities.
Me: Okay? Yeah.
Them: Intercompany ones, but some of them are fixed. These ones at the top are a little bit more tax driven, like this three billion dollar loan. Was. It's a whole story behind it. But essentially, this column is just tracking what's. How much have you borrowed on, which is what's accruing interest on your loan.
Me: Gotcha.
Them: And then we did the USD equivalent, of course, and then the notional amount represented the full amount of the loan. So the way to really read that is you can kind of go down to some of the ones at the bottom here. You'll see that, say, like, row 40, for example. This is a Chilean peso loan. We borrowed 4.2, 4.2 billion peso. Out of 13 billion that we have the access to, right?
Me: Gotcha. So this is the full credit.
Them: Yeah. That you could draw up to.
Me: Yeah.
Them: The interest rate. This is where things started getting really manual and tricky. So this is pulled from a different tab, but essentially this would be whatever the benchmark rate in September was, plus the spread. But.
Me: And sorry, stupid question, but the benchmark rate here, is it in the country of the borrower or the lender?
Them: It's typically linked to the currency. Because the currency has an interest rate, right? So if you wanted to see that, there's an interest rates tab, but this is being pulled from that I was updating every month. That one. So these are all the different benchmark rates that we were using. The rate.
Me: On. Go.
Them: So these were pulled from Bloomberg, basically. And if you scroll over, these were the rates of the first day of the business month of that specific benchmark rate. So these are then. These, plus the spread gave you the interest rate for the month.
Me: Any update monthly.
Them: Yeah.
Me: Sorry. The stupid question, but is it? Does it update for the loan monthly, like a loan that already exists? As well. Or is it, like, for a new loan, then this?
Them: No.
Me: Rate line.
Them: Yes. So these benchmark rates are published through the different, again, different central banks of the world or whatever. So these rates here that are pulled are from Bloomberg.
Me: Yes.
Them: That are. These are. These are published rates by some authority that's responsible for that rate.
Me: Yes.
Them: Right.
Me: But is it time like is so. This is part of the foundation for the rate of the intercompany loan, right?
Them: Exactly. So if you.
Me: And starting the company loan rate, then also update every month. Or is it more like, hey, I'm taking out a loan in March. Then that's my rate, you know what I mean? Like.
Them: Yep. In these agreements, it was refreshed for the whatever the rate was on the first day of that month. Was going to be the interest that's going to be charged for the rest of the month.
Me: Okay, so it still changes over, like, month.
Them: So if. Yeah. Dynamic. Yeah. So if you. If. If at the tabs there, you scroll over to the right a little bit, we'll open up one of the loans, and I'll show you what I mean.
Me: Sorry. Go back to the summary.
Them: Yeah, let's just go to summary. Yeah, we've got a summary called link to do there. So then if you scroll all the way to the right, you'll see a Details. Yeah, those links there and column U. If you click into one of those, here's where the calculation was being done for both. The interest rate as well as the interest on this specific loan. So how did, how did we do this? The rate that we're using as a benchmark is that that three month Canadian dollar offered rate. You see that C door towards the left? All the way on the left where it says Rate. Yeah, that one. So that was. So that's the benchmark reference rate that we're using. Right? So that whatever the C door is or the first day of the month is going to be the rate plus a spread. So if you now scroll over to the right and at the top, you'll see we have this interest rate. Versus interest plus spread and then all in rate. That would be your rate for the month. Of December. So any, any principle that you've borrowed in December is going to get charged. 0, 32% or 3.2%. And then in January, we would carry over the formulas and say, okay, what's the. What's the rate for C door on January 1st? It's 020775.
Me: Would it have been different if it wasn't like, a revolving credit facility thingy? If it was just like a one time? Hey, Here you go. $1 million. Would the rate still update? For the remaining principal month over month? Or is it like. I guess they can be all sorts of.
Them: Yeah. So it doesn't matter if you. If you borrow in one shot or you make it a revolver. The interest rate, whether it's being updated or not. It's its own terms. So you could have a fixed interest rate.
Me: Yeah.
Them: Or you could have a floating is the representation of there's a benchmark that changes and then the interest rate follows. So if you, if you were to go back, we do have some loans that are fixed.
Me: Got you.
Them: At, like 3%. I think it was one of the larger ones.
Me: Oh, my God. Summary.
Them: Yeah. So I think it was. Some of the ones at the top we had fixed. I. I don't remember exactly, but I think, like. What? Yeah, you could. Yeah, if you wanted to. Just check. AF our midterm. No, that's a floating rate. It would just. It would just say rate is 3% or something like that. Maybe.
Me: Yeah.
Them: That. Okay, this is.
Me: This was. Hard to miss.
Them: Oh, man, I don't even remember what this is from.
Me: Okay? No, but I understand. I don't have to.
Them: Yeah, yeah, yeah. I don't think you need to see that part, right. So then you have your standing. So you have. If you scroll back over to the left, I'll just walk through the columns. So we've done the interest rate, which is in most of these, floating. Then we're tracking how much interest has been paid.
Me: Yes.
Them: That's really straightforward. How much interest is outstanding. So the way that we had set up these loans was anytime you repaid any principal on a loan, you had to pay all of the accrued interest first. And so that's what we were tracking. How much interest has been paid? Withholding tax. We'll skip over for now and FINCAP will skip over for now. It gets a bit more complex. We didn't really get too much into this. This requires a lot of input from tax teams and all that stuff, so.
Me: Okay, and what do they need to produce this? They need some of these numbers.
Them: We need to calculate what the withholding tax is between and between the two countries. And so this withholding tax rates are confirmed by tax teams.
Me: Yeah, no, definitely what the tax team need in terms of input from treasury to calculate this number.
Them: They don't need anything from, from Treasury. So the, the, the withholding tax rates are, are in the tax regime of the country.
Me: Okay?
Them: So it doesn't. So. But treasury is a receiver of the input. If you want to calculate what that withholding taxes. Right. Thin cap rules. So thin cap. This is just basically, thin cap is short for thin capitalization. That's basically some company some countries set up rules on based on how much your company is worth or how much equity you have as a company. You can only borrow an X amount, more like more than your company's worth. Meaning if I'm. If I'm in a company in a country where I have a thin cap. Rule of one. And my company is worth a billion dollars. I can't borrow more than a billion dollars. In some countries, there's no limit. So I could be worth 100 and borrow up to 10 bazillion dollars. It doesn't matter. But there are. There are rules by countries around how much are you allowed to borrow based on the value of your company? We were still working on this one. This was. Wasn't used too much because we couldn't figure out a. A smart and like, we couldn't figure out a way to really track it properly to where we can make decisions off of it. This was just one of the things that we were still working on. When I left is how do we track the capital limits? Yeah. So. Yeah, and the rest is just stuff close. Close to thin cap. And then the details link was just us getting us into the individual loans. So you can track the borrowings and whatnot.
Me: Yep.
Them: So how was this used? This was sent out every month. On the first day of the month.
Me: Yeah.
Them: Was updated for any new loan draws that were done throughout the month, plus the update to the interest rate plus the update to the interest accrued. And it would go over to our accounting teams. They would then say, okay, we see all of these loan draws that have happened. So the money's moved across bank accounts. Let's confirm. We see this money movements across bank accounts. Okay, that's confirmed. And then let's go ahead and book these accounting entries as loans. So that we. We recognize them as loans versus any other sort of intercompany transfer transaction. And then at the end of the year, this was again based off of our agreements. At the end of the year, we had to settle all existing interest, accrued interest up until December 31st. So starting so in November, we would post a report and say, this month we're going to settle all this outstanding interest. And then kick off the payments to settle it accordingly. Which was a challenge in itself because in some countries you have to do a bunch of documentation before you can move money or whatever. The other thing we used it for is to track if we were going to go over on any loans. Basically, as in, are there some that where we've maxed out, do we need to increase. Are any of them expiring? Do any of them have any. Yeah, any payments due, as in. How do we use it? We use it in a sense where if we were building up balances in a specific country, we would check, can we repay a loan down. And try to get rid of. We wanted to get rid of the loans. The management, as you can see, was a pain in the ass. And so anytime a company, any country, built up a big enough balance, we would double check to see can we take that balance, pay off this loan and then close the loan out and that's. One last thing to track. But yeah, that's. That's the way we did it. We try to take this and put it into Kariba. We did go through an RFP with Kyriba to get user intercompany loan module. It was a complete mass. Like, nobody on our team want. Nobody from other teams within our group wanted to use it. So, like the accounting teams or tax teams, because you could imagine it's a really funky setup in the way Kareema manages it. It looks nothing like this, and it's hard to really follow. What's happening. They send you a kind of, like, loan schedules, basically. But in my eyes, I think if I think about us tracking loans, something that. 's maybe even simpler than what you just saw there. Right? But like, we take off the debt to equity, the thin cap stuff. But if you could say borrower, lender, borrower, amount, interest rate, how much is borrowed? How much interest is owed? How much interest is paid? Great report to be able to send that because most teams are going to be treasure. Teams are building these and sending these out on a daily basis.
Me: Let's chat about. Let's jump into the next session. We keep chatting about that.
Them: Yeah. Y.
Me: Will join us also. Thank you.
Them: Es off. I. I know it's a lot. It was a lot. But, yeah, got more.
Me: It's good. It's good, it's good. I'm glad I have Granola.
Them: Good.
Me: See you now.