Corporate Credit Analysis & Financial Modelling

5 days 7-11 Nov 2016, Hong Kong Hong Kong $6,800.00 Download brochure Add to basket
5 days 5-9 Dec 2016, London UK £4,895.00 + VAT* Download brochure Add to basket

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Overview

Course background

Through every business cycle, banks and other financial institutions lose billions of dollars as a result of their failure to analyse credit risk correctly and to foresee downside risks. Even if these institutions do not suffer direct financial losses due to default / market movements, they may be receiving an inadequate return for the risks involved. Given the increasing use of leverage by both the private and public equity markets, combined with heightened sovereign/geo-political risks, in-depth credit analysis is essential to avoiding credit and currency losses. The aim of this course is to teach delegates how to analyse corporate credit risk and how to assess an appropriate return. This course does not extend to the analysis of banks, insurance companies or structured vehicles.


How will this course assist you?

  • Through case study analysis you will learn to analyse thoroughly different types of corporates to allow you to make sound business decisions.
  • During the five day course, we will cover:
  • The bank loan and bond markets
  • Qualitative risk analysis: sovereign, industry & company specific
  • Quantitative risk analysis including key credit ratios
  • Credit ratings & the rating agencies
  • Impact of corporate finance activity on credit quality
  • Financial modeling in Excel, including LBOs
  • How to apply sensitivity analysis
  • Documentation: high grade & high yield prospectuses, loan document
  • Default predictors & recovery rates
  • Structural & contractual subordination 

 

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.

    Hong Kong
    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.

    Venue

    Hong Kong

    4-5 Star Hotel in Hong Kong

    All of our courses are held in 4 – 5 star hotels, chosen for their location, facilities and level of service. You can be assured of a comfortable, convenient learning environment throughout the duration of the course.

    Due to the variation in delegate numbers, we will send confirmation of the venue to you approximately 2 weeks before the start of the course. 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.

    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.

    Related Courses

    Inhouse

    We can bring this course to your company's office.

    If you simply 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. Our tailored learning solutions are designed specifically for your organisation’s needs.

    We’ll be here to support you every step of the way. From the initial consultancy through to evaluating the success of the full learning experience. We'll ensure you get the maximum return on your training investment.

    Find out more

    Agenda

    Agendas are localised, please select your preferred location.

    Day 1

    Section 1: Types of lending

    • Different types of bank facilities
    • The bond markets - high grade and high yield
    • Credit default swaps

    Section 2: Quantitative analysis

    Review of historic results - assessment of financial position and risks

    • Analysing the P&L account
    • Understanding the sources and sustainability of revenues & earnings
    • Understanding the nature of the cost base
    • Adjusting for exceptionals, non-core earnings, discontinued items, operating leases, derivatives
    • Adjusting for joint-ventures/associates and NCI
    • Analysing EBITDAR, EBITDA, EBIT; pitfalls of using EBITDA or adjusted EBITDA
    • What constitutes finance expense, including expenses for derivatives and quasi debt
    • Ratio analysis: margins (gross, EBITDAR, EBITDA, EBIT, pre-tax, net), interest cover, basic and enhanced dividend cover
    • Analysing the cashflow statement
    • IFRC layout – operating cashflow, NWC, investment & financing
    • Reorganising the cashflow statement to show CADR
    • Differences between operating earnings and operating cashflow
    • Primary and secondary sources of debt repayment
    • Cashflow based lending vs asset based lending
    • Ratio analysis: Interest and investment coverage; debt service and debt repayment coverage, cash conversion ratios, dependence on external financing, cashflow based ROIC, dividend coverage

    Day 2


    Section 2: Quantitative analysis

    Review of historic results (continued)

    • Analysing the balance sheet
    • The asset base and consolidation policies
    • What constitutes debt – derivatives & quasi-debt
    • Off balance sheet liabilities
    • Adjusting for securitised receivables, operating leases, vendor funding, recourse financing, contingent liabilities, letters of credit, performance guarantees, retiree benefit deficits
    • Liquidity analysis
    • NCI, joint ventures & equity accounting
    • Ratio analysis: leverage, liquidity, asset coverage, working capital, ROIC, ROE, asset turnover, Dupont analysis
    • Case studies: analysis of a retailer & property company
    • Assessing debt capacity: balancing growth with asset turnover & financial policy
    • Accounting factors; how results can be manipulated


    Day 3


    Session 3: Modelling and forecasting in Excel

    • Creation of full financial forecasting models
    • Creation of assumptions – what are the critical value drivers?
    • Return analysis
    • Creation of covenant package
    • LBO model
    • Sensitivity analysis – base case, management case, downside cases
    • Case studies: modelling with Excel of historic accounts, creation of forecasts, calculation and analysis of ratios, creation of covenants. Creating a refinancing package for a cyclical company. Modelling different scenarios in one worksheet.

    Day 4


    Session 4: Business risk analysis (qualitative factors)

    • Sovereign
      - Economy, currency, credit rating, political risks
      - Key  themes for 2016
    • Industry
      - Porter’s five forces
      - Industry life cycle (growth)
      - Industry cyclicality (earnings quality)
      - Leading indicators
      - Competition
      - Pricing dynamics; demand vs. supply
      - Changing business environments
      - Regulation
      - Capital intensity and cost base
    • Case study: review credit of company in changing industry environment
    • Company specific
      - Management
      - Operating, capital and corporate finance strategies
      - Competitive advantages and cost position
      - Product/service offering, differentiation and pricing power
      - Diversification
      - Customer/supplier concentration
    • Structural factors
      - Shareholder structure
      - Ownership and support
      - Structural and contractual subordination
      - Impact of structural issues on ratings

    Session 5: Credit ratings

    • Rating scales and definitions
    • Recovery ratings
    • Relevance of sovereign ratings
    • Advantages & limitations of the rating agencies

    Session 6: Leverage analysis

    • The advantages and disadvantages of leverage: debt vs. equity
    • Suitability for leverage
    • Determinants of leverage
    • Impact of shareholder value considerations on credit quality
    • Double leverage
    • Case study: evolution of BAA’s risk and financial profile and structure of borrowing

    Day 5


    Session 7: Impact of corporate finance transactions on credit quality

    Corporate finance transactions

    • Mergers, acquisitions, disposals, breakups, demergers, LBOs, etc
    • Case studies: impact of M&A on credit quality

    Leveraged buyouts

    • Rationale to LBOs
    • Structuring an LBO
    • Quick method of modelling an LBO
    • Assessing returns to equity and subordinated lenders

    Session 8: Pricing for bonds and loans

    Session 9 : Documentation and covenants

    • What is the purpose of the loan and is it related to the repayment sources?
    • What is the structure of debt facilities?
    • Documentation
    • Overview of a loan agreement
    • Overview of high grade and high yield bond prospectuses
    • Reps and warranties, conditions precedent, negative pledge
    • MAC clauses, events of default, cross default, equity cures etc
    • Focus on covenants financial and non-financial covenants
      - Covenant definitions (financial), including off-balance sheet liabilities
      - Covenant definitions (nonfinancial) what makes for stronger or weaker covenants
      - The 8 key covenants for event and recapitalisation risks

     Course summary and close

    Day 1


    Registration commences at 8.15am

    Programme runs from 8.30 – 4.30 daily

    Section 1: Types of lending

    • Different types of bank facilities
    • The bond markets - high grade and high yield
    • Credit default swaps

    Section 2: Quantitative analysis

    Review of historic results - assessment of financial position and risks

    • Analysing the P&L account
    • Understanding the sources and sustainability of revenues & earnings
    • Understanding the nature of the cost base
    • Adjusting for exceptionals, non-core earnings, discontinued items, operating leases, derivatives
    • Adjusting for joint-ventures/associates and NCI
    • Analysing EBITDAR, EBITDA, EBIT; pitfalls of using EBITDA or adjusted EBITDA
    • What constitutes finance expense, including expenses for derivatives and quasi debt
    • Ratio analysis: margins (gross, EBITDAR, EBITDA, EBIT, pre-tax, net), interest cover, basic and enhanced dividend cover
    • Analysing the cashflow statement
    • IFRC layout – operating cashflow, NWC, investment & financing
    • Reorganising the cashflow statement to show CADR
    • Differences between operating earnings and operating cashflow
    • Primary and secondary sources of debt repayment
    • Cashflow based lending vs asset based lending
    • Ratio analysis: Interest and investment coverage; debt service and debt repayment coverage, cash conversion ratios, dependence on external financing, cashflow based ROIC, dividend coverage

    Day 2


    Section 2: Quantitative analysis

    Review of historic results (continued)

    • Analysing the balance sheet
    • The asset base and consolidation policies
    • What constitutes debt – derivatives & quasi-debt
    • Off balance sheet liabilities
    • Adjusting for securitised receivables, operating leases, vendor funding, recourse financing, contingent liabilities, letters of credit, performance guarantees, retiree benefit deficits
    • Liquidity analysis
    • NCI, joint ventures & equity accounting
    • Ratio analysis: leverage, liquidity, asset coverage, working capital, ROIC, ROE, asset turnover, Dupont analysis
    • Case studies: analysis of a retailer & property company
    • Assessing debt capacity: balancing growth with asset turnover & financial policy
    • Accounting factors; how results can be manipulated


    Day 3


    Session 3: Modelling and forecasting in Excel

    • Creation of full financial forecasting models
    • Creation of assumptions – what are the critical value drivers?
    • Return analysis
    • Creation of covenant package
    • LBO model
    • Sensitivity analysis – base case, management case, downside cases
    • Case studies: modelling with Excel of historic accounts, creation of forecasts, calculation and analysis of ratios, creation of covenants. Creating a refinancing package for a cyclical company. Modelling different scenarios in one worksheet.

    Day 4


    Session 4: Business risk analysis (qualitative factors)

    • Sovereign
      - Economy, currency, credit rating, political risks
      - Key  themes for 2016
    • Industry
      - Porter’s five forces
      - Industry life cycle (growth)
      - Industry cyclicality (earnings quality)
      - Leading indicators
      - Competition
      - Pricing dynamics; demand vs. supply
      - Changing business environments
      - Regulation
      - Capital intensity and cost base
    • Case study: review credit of company in changing industry environment
    • Company specific
      - Management
      - Operating, capital and corporate finance strategies
      - Competitive advantages and cost position
      - Product/service offering, differentiation and pricing power
      - Diversification
      - Customer/supplier concentration
    • Structural factors
      - Shareholder structure
      - Ownership and support
      - Structural and contractual subordination
      - Impact of structural issues on ratings

    Session 5: Credit ratings

    • Rating scales and definitions
    • Recovery ratings
    • Relevance of sovereign ratings
    • Advantages & limitations of the rating agencies

    Session 6: Leverage analysis

    • The advantages and disadvantages of leverage: debt vs. equity
    • Suitability for leverage
    • Determinants of leverage
    • Impact of shareholder value considerations on credit quality
    • Double leverage
    • Case study: evolution of BAA’s risk and financial profile and structure of borrowing

    Day 5


    Session 7: Impact of corporate finance transactions on credit quality

    Corporate finance transactions

    • Mergers, acquisitions, disposals, breakups, demergers, LBOs, etc
    • Case studies: impact of M&A on credit quality

    Leveraged buyouts

    • Rationale to LBOs
    • Structuring an LBO
    • Quick method of modelling an LBO
    • Assessing returns to equity and subordinated lenders

    Session 8: Pricing for bonds and loans

    Session 9 : Documentation and covenants

    • What is the purpose of the loan and is it related to the repayment sources?
    • What is the structure of debt facilities?
    • Documentation
    • Overview of a loan agreement
    • Overview of high grade and high yield bond prospectuses
    • Reps and warranties, conditions precedent, negative pledge
    • MAC clauses, events of default, cross default, equity cures etc
    • Focus on covenants financial and non-financial covenants
      - Covenant definitions (financial), including off-balance sheet liabilities
      - Covenant definitions (nonfinancial) what makes for stronger or weaker covenants
      - The 8 key covenants for event and recapitalisation risks

     Course summary and close

    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