Advanced Credit Analysis

5 days 9-13 Oct 2017, London UK £4,895.00 + VAT* Download brochure Add to basket
4 days 13-16 Nov 2017, Singapore $6,150.00 Download brochure Add to basket

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Overview


Course Background
Banks and other financial institutions continue to lose billions of dollars annually due to their failure to analyse and anticipate credit risks correctly. Even when financial institutions do not suffer direct financial losses due to default or market movements, they may be receiving an inadequate return for the risks involved. With leveraged instruments set to remain a standard part of corporate capital structures, in both the private and public markets, and with geo-political risks set to remain at a high level, knowing how to analyse and minimize credit risk remains key to avoiding losses, maximising returns and limiting capital usage. This course introduces more advanced analytical and structuring techniques for assessing, limiting and offsetting credit risks. This course does not extend to the analysis of banks, insurance companies or structured vehicles.

Methodology
The course combines formal theoretical instruction with frequent use of exercises and case studies. These are based on real situations and are designed to help delegates implement new practices and to learn from empirical experience. Delegates are expected to know how to use Excel. The course is practical and interactive, with delegates encouraged to ask questions. The techniques taught are intended to be of immediate practical use in the workplace. The lecturer will be available throughout the duration of the course to offer additional help if required.

A 5-day training course with extensive case studies covering:

  • Advanced financial analysis, including calculating key credit ratios
  • Advanced financial modelling in Excel
  • Credit enhancement methods; securitization, netting, cashflow ringfencing structures
  • Credit linked notes
  • Parent and subsidiary rating linkage
  • Sovereign risk – importance to corporates; key market and rating criteria
  • Sovereign debt – composite issuance, guaranteed and partially guaranteed debt
  • Company valuation for acquisition finance and distressed situations
  • Deteriorating credits, potential and actual NPLs: warning signs and strategies for minimizing loss

Who Should Attend?

  • Bank credit officers
  • Investment bankers
  • Management consultants
  • Bond credit analysts
  • Fixed income/credit traders
  • Fixed income/credit sales people
  • Fund managers
  • Treasurers
  • Compliance officers
  • Financial decision makers in corporations

 

Other courses run by this instructor:

Problem Loans & Distressed Debt Restructuring
Advanced Credit Analysis
London School of Credit Analysis
Corporate Valuation: Techniques & Applications

 

Who should attend

  • Bank credit officers
  • Investment bankers
  • Management consultants
  • Bond credit analysts
  • Fixed income/credit traders
  • Fixed income/credit sales people
  • Fund managers
  • Treasurers
  • Compliance officers
  • Financial decision makers in corporations

Instructors

We work with a series of expert instructors, please select the course location of interest to review the credentials of who will be delivering the programme.

London
Sarah Martin

Former Executive Director of CSFB and Lehman Brothers, the Course Director has spent seventeen years working as an investment banker in Europe and the US. She has principally worked in the credit markets and has experience of the US and European high grade and high yield markets, the European new issue markets, the Asian convertible bond markets and of corporate restructurings of distressed credits. She specialised in the telecoms sector and was closely involved in the structuring, raising and/or trading of bank and public debt for telecoms companies in many countries, including Europe, South Africa, Asia and Latin America. She also has extensive experience of corporate finance transactions, including mergers, disposals, privatisations, IPOs and capital raisings. Until 2003, she was an Executive Director at Lehman Brothers in Fixed Income Research in London, having also worked for CS First Boston and Kleinwort Benson. She now works on an independent basis advising the legal and private equity professions on credit analysis and company valuation. She has a degree in economics from the London School of Economics and stock exchange qualifications from London and New York.

Singapore

Venue

London

Central London Hotel Venue

All courses are held at four or five star venues in Central London, Zone 1. We strive to provide you with a training environment of the highest quality, to ensure that the whole learning experience exceeds your expectations.

Your training venue will be confirmed by one of our course administrators approximately 3-4 weeks before the course start date.

Singapore

Singapore Hotel

This programme takes place on a non-residential basis at a central Singapore hotel. Non-residential course fees include training facilities, documentation, lunches and refreshments for the duration of the programme. Delegates are responsible for arranging their own accommodation, however, a list of convenient hotels (many at specially negotiated rates) is available upon registration.

 


 

Related Courses

Inhouse


 

Do you have five or more people interested in attending this course? Do you want to tailor it to meet your company's exact requirements? If you'd like to do either of these, we can bring this course to your company's office. You could even save up to 50% on the cost of sending delegates to a public course.

To find out more about running this course in-house:





Our Tailored Learning Offering

If you want to run this course at a location convenient to you or if you want a completely customised learning solution, we can help.

We produce learning solutions that are completely unique to your business. We'll guide you through the whole process, from the initial consultancy to evaluating the success of the full learning experience. Our learning specialists ensure you get the maximum return on your training investment.



We can offer any of our public courses delivered at your office or we can devise completely tailored solutions:


Read more about our offering or complete a call back request to speak to a learning specialist.

 

Agenda

Agendas are localised, please select your preferred location.

Day 1


Advanced financial analysis, including calculating key credit ratios

Income Statement

  • Revenues and earnings – sustainability, growth outlook, main risk factors
  • Key accounting factors – revenue recognition (IFRS 15), deferred revenue, expense allocation, derivatives (IFRS 9)
  • Adjusting for exceptional and non-core items – restructuring, provisions, impairments, MTM of financial assets and liabilities, disposal gains/losses, employee benefits (IAS 19), business combinations (IFRS 3), leases (IAS 17), customer loyalty programmes (IFRIC 13)
  • Use of EBITDAR, EBITDAX, EBITDA and EBIT – underlying and adjusted
  • Calculating interest and quasi-interest expense
  • Joint venture/associate earnings and minority interests

Cashflow statement

  • Deriving operating and net operating cashflow
  • Impact of NWC movements on cashflow – considering seasonality
  • Does operating cashflow cover tax, interest, investment spending, dividends?
  • Analysing the main sources and uses of cash
  • What are the main cash sources of debt service and debt repayment?


Day 2


Advanced financial analysis, including calculating key credit ratios (continued)

Balance sheet/Statement of financial position

  • Calculating net debt – adjusting for quasi debt, hybrid-debt (eg convertible bonds, preferred), derivatives, financial and non-financial assets, cash collateral
  • Adjusting for off-balance sheet items (securitised receivables, vendor-funding, operating lease receivables/payables, guarantees, performance bonds, buy-back obligations, LCs etc) and recourse/non-recourse entities
  • Advanced ratio calculations: margins, interest cover, dividend cover, ROIC, ROE, leverage, liquidity, debt service, investment cover, Dupont formula

Case studies of complex high yield and high grade corporate financial statements

Advanced financial modelling in Excel

  • Overview of a comprehensive financial forecasting model including key revenue drivers, provisions, deferred tax, joint ventures/associates, minority interests, disposal gains etc
  • Modelling operating leverage – fixed and variable costs
  • Modelling amend and extend facilities
  • Modelling for a new capital structure eg following new shareholder value policies,  share buybacks, acquisitions, deleveraging
  • Modelling new loan features eg PIK toggles, amortizations, cash sweep, equity kickers


Day 3


Credit enhancement methods

Whole business securitization

  • Typical structure and participants
  • Creating cashflow ring-fencing measures
  • Rating considerations

Case study of a recent major ringfencing mechanism to give lenders additional protection

Netting

Credit linked notes

Parent and subsidiary rating linkage

Credit assessment of:

  • Nonrecourse projects e.g. associates and joint ventures
  • Non-guaranteed subsidiaries
  • Captive finance subsidiaries
  • Rating agency criteria for associates, j/vs, subsidiaries, finance subsidiaries

Case study to assign ratings to different entities within a group

Sovereign risk – importance to corporates; key market and rating criteria

  • Key themes of 2015: deflation, strong US dollar, oil prices winners and losers, Russia

Case studies covering the current most risky sovereign situations and the impact of recent ECB initiatives

Sovereign debt

  • Sovereign composite issuance
  • Sovereign guaranteed debt
  • Sovereign partially guaranteed debt

Company valuation for acquisition finance and distressed situations

  • Key factors that influence corporate valuation
  • Enterprise value versus equity value
  • Multiple valuations, including PE ratios, EBITDA(R) multiples, revenue multiples, NAV multiples


Day 4


Company valuation for acquisition finance and distressed situations continued

  • Discounted cashflow valuations – uses, advantages and disadvantages, pitfalls
  • Calculating WACC, including tax shields, long term debt cost, cost of equity
  • Calculating unlevered FCF
  • Fade forecasts and terminal valuations

Case studies to practice EV and equity valuations and to cover the importance of corporate valuations to lenders

Distressed credits and NPLs

  • Identifying the problems
  • Early warning signs of business deterioration
  • Developing a revised business plan
  • Does the firm have a future?
  • Basic legal considerations; complexities of cross-border restructurings
  • Assessing recovery rates
  • Assessing the options: liquidation or administration/restructuring
  • Operational restructuring: management changes, strategy changes, running the firm for cash
  • Debt restructuring options:

              - Renegotiation of terms: PIK, higher interest, extended maturities, additional security, warrants, ratchet exit fees etc
              - Equity injection
              - Debt forgiveness
              - Debt for equity swap/warrants
              - Debt for debt swap
              - Discounted debt buyback
              - Sale of entire company

Case studies of distressed credits that survived and that went bankrupt


Day 5


Understanding the key legal elements of debt documentation

Introduction to the legal structure key debt products:

  • Loans and bonds

           - Why is the documentation different?
           - Where do the products overlap?

  •  The concepts behind subordination and intercreditor arrangements:

            - Controlling cash flows
            - Rights of enforcement and recovery
            - What is pari passu and does it matter?

  • The impact of the search for liquidity on debt structures

Key contractual provisions in credit protection:

  • Getting the credit risk right in the documentation?
  • Equality amongst investors?

         - Secured vs unsecured lenders
         - Is your initial credit position protected against new investors

Key contractual provisions in credit protection (continued):

  •  Protecting against value leakage:

          - Financial covenants
          - Operational covenants
          - Events of default

What to look out for when considering amendments and waivers 

Summary of the impact of the financial crisis on loan documentation:

  • High Yield Bonds
  • Defaulting lenders
  • The new approach to revolving credit facilities
  • Letters of credits
  • Voting
  • Intercreditor issues

Course summary and close

*FTS Eligible - Financial Training Scheme for Singaporean citizens and PRs only (more information)

Day 1

Advanced financial analysis, including calculating key credit ratios

Income Statement

  • Revenues and earnings – sustainability, growth outlook, main risk factors
  • Key accounting factors – revenue recognition (IFRS 15), deferred revenue, expense allocation, derivatives (IFRS 9)
  • Adjusting for exceptional and non-core items – restructuring, provisions, impairments, MTM of financial assets and liabilities, disposal gains/losses, employee benefits (IAS 19), business combinations (IFRS 3), leases (IAS 17), customer loyalty programmes (IFRIC 13)
  • Use of EBITDAR, EBITDAX, EBITDA and EBIT – underlying and adjusted
  • Calculating interest and quasi-interest expense
  • Joint venture/associate earnings and minority interests

Cashflow statement

  • Deriving operating and net operating cashflow
  • Impact of NWC movements on cashflow – considering seasonality
  • Does operating cashflow cover tax, interest, investment spending, dividends?
  • Analysing the main sources and uses of cash
  • What are the main cash sources of debt service and debt repayment?

Day 2

Advanced financial analysis, including calculating key credit ratios (continued)

Balance sheet/Statement of financial position

  • Calculating net debt – adjusting for quasi debt, hybrid debt (eg convertible bonds, preferred), derivatives, financial and non-financial assets, cash collateral
  • Adjusting for off-balance sheet items (securitised receivables, vendor-funding, operating lease receivables/payables, guarantees, performance bonds, buy-back obligations, LCs etc) and recourse/non-recourse entities
  • Advanced ratio calculations: margins, interest cover, dividend cover, ROIC, ROE, leverage, liquidity, debt service, investment cover, Dupont formula

Case studies: Complex high yield and high grade corporate financial statements

Advanced financial modelling in Excel®

  • Overview of a comprehensive financial forecasting model including key revenue drivers, provisions, deferred tax, joint ventures/associates, minority interests, disposal gains, etc
  • Modelling operating leverage – fixed and variable costs
  • Modelling amend and extend facilities
  • Modelling for a new capital structure (eg. following new shareholder value policies, share buybacks, acquisitions, deleveraging)
  • Modelling new loan features (eg. PIK toggles, amortizations, cash sweep, equity kickers)

Day 3

Credit enhancement methods

Whole business securitization

  • Typical structure and participants
  • Creating cashflow ring-fencing measures
  • Rating considerations

Case study: A recent major ring-fencing mechanism to give lenders additional protection

Netting

Credit linked notes

Parent and subsidiary rating linkage

Credit assessment of:

  • Non-recourse projects e.g. associates and joint ventures
  • Non-guaranteed subsidiaries
  • Captive finance subsidiaries
  • Rating agency criteria for associates, j/vs, subsidiaries, finance subsidiaries

Case study: Assign ratings to different entities within a group

Sovereign risk – importance to corporates; key market and rating criteria

Case studies: Covering the current most risky sovereign situations and the impact of recent ECB initiatives

Sovereign debt

  • Sovereign composite issuance
  • Sovereign guaranteed debt
  • Sovereign partially guaranteed debt

Company valuation for acquisition finance and distressed situations

  • Key factors that influence corporate valuation
  • Enterprise value versus equity value
  • Multiple valuations, including PE ratios, EBITDA(R) multiples, revenue multiples, NAV multiples

Day 4

Company valuation for acquisition finance and distressed situations (continued)

  • Discounted cashflow valuations – uses, advantages and disadvantages, pitfalls
  • Calculating WACC, including tax shields, long-term debt cost, cost of equity
  • Calculating unlevered FCF
  • Fade forecasts and terminal valuations

Case studies: Practice EV and equity valuations and to cover the importance of corporate valuations to lenders

Distressed credits and NPLs

  • Identifying the problems
  • Early warning signs of business deterioration
  • Developing a revised business plan
  • Does the firm have a future?
  • Basic legal considerations; complexities of cross-border restructurings
  • Assessing recovery rates
  • Assessing the options: liquidation or administration/restructuring
  • Operational restructuring: management changes, strategy changes, running the firm for cash
  • Debt restructuring options:
    • Re-negotiation of terms: PIK, higher interest, extended maturities, additional security, warrants, ratchet exit fees., etc
    • Equity injection
    • Debt forgiveness
    • Debt for equity swap/warrants
    • Debt for debt swap
    • Discounted debt buyback
    • Sale of entire company

Case studies: Distressed credits that survived and that went bankrupt 

Why us


We have a combined experience of over 60 years providing learning solutions to the world’s major organisations and are privileged to have contributed to their success. We view our clients as partners and focus on understanding the needs of each organisation we work with to tailor learning solutions to specific requirements.

We are proud of our record of customer satisfaction. Here is why you should choose us to help you achieve your goals and accelerate your career:

  • Quality – our clients consistently rate our performance ‘excellent’ or ‘outstanding’. Our average overall score awarded to us by our clients is nine out of ten.
  • Track record – we have delivered training solutions for 95% of worlds’ top 100 banks and have trained over 250,000 professionals.
  • Knowledge – our 150 strong team of industry specialist trainers are world leading financial leaders and commentators, ensuring our knowledge base is second to none.
  • Reliability – if we promise it, we deliver it. We have delivered over 20,000 events both in person and online, using simultaneous translation to delegates from over 180 countries.
  • Recognition – we are accredited by the British Accreditation Council and the CPD Certification Service. In an independent review by Feefo we scored 96% on service and 95% on product