Corporate Credit Risk Analysis

The course makes extensive use of case studies, live examples and exercises to ensure that the training is highly interactive, practical, topical and challenging. Case studies are drawn from a number of countries and industries and provide participants with the opportunity to practice the application of the analytic frameworks and tools in context. The emphasis is on developing critical judgment; participants are required to be focused, practical and realistic in their approach. - Structured and focused on their approach to analyzing corporate credit risk. - More effective in assessing the success of a company’s business model and the appropriateness of a company’s capital structures (i.e., the degree of liquidity and the ability to service debt). - Better equipped to critique the terms and conditions of credit instruments to ensure that they reflect the commercial needs of the business and protect the debt provider’s position.

Venues

Dublin
London
Dubai
Edmonton (CAN)
Lagos/Abuja

Dates

Dublin	London	Dubai	Edmonton (CAN)	Lagos/Abuja
TBD	TBD	TBD	TBD	TBD

Cost

$4,000 per participant (USD) (=N=)

For Whom

Experienced lending bankers
Fund managers involved in the provision of credit
Other interested professionals who have a firm grasp of accounting and have credit experience before attending this programme

Snapshot of Course Content

Purpose – Payback model: A Structured Analytic Approach
A 4-step approach to credit analysis: Purpose, Payback, Risks, and Structure
Determining the purpose: Evaluating the borrowing entity and assessing the potential for structural and/or economic subordination
Assessing availability of repayment sources: Refinancing/access to markets, cash-flow profits, market value of assets
Evaluating risks to repayment: uncovering the risks that could jeopardize repayment
Structure: evaluating the risks in the exposure profile, ranking, safeguards, and pricing
Steps 1 and 2: Purpose and Payback
Ratings and Relative Value Overview: understanding corporate debt ratings, the criteria adopted and analytic approaches applied
Understanding how credit ratings impact market access and limit available repayment sources and debt structures
The impact of cyclicality on default and recovery rates
Using default and recovery statistics to evaluate an appropriate level of return (risk-adjusted return on capital)
Understanding why bonds might trade “outside” their rating
Step 3: Risks to Repayment
Statement logic: understanding how the business dynamics impact the asset configuration, funding structure and earnings of companies in different sectors
Analysing sector-specific drivers: how companies operate, key competitors, the basis of competition, impact of economic/political factors and the outlook for growth and earnings
Assessing the characteristics necessary for industry success and a company’s ability to create and sustain a competitive advantage
Sector-specific analysis and the key measures of performance: understanding profitability, investment needs, funding structures and cash-flow dynamics
Using the business cycle to create expectations about balance sheet structures and income statement performance
Evaluating Business Risk
Assessing Commercial Viability: Asset investment and earning dynamics
Evaluating the business model: a practical approach to assessing the success of management’s strategy
Use of peer analysis to benchmark performance: Focusing on ratio and cash-flow tools
Understanding how differences in the business model impact the peer analysis
Quantifying performance looking beyond EBITDA: Defining, calculating and using operating cash-flow
Assessing a company’s ability to sustain EBITDA and free cash-flow
Assessing performance, operating profits versus operating cash-flow
Different accounting conventions: uncovering misleading accounting practices
Forecasting the Business Requirements
Determining key industry drivers and company-specific variables
Assessing forecasts of operating performance and asset investment requirements
Understanding the cash-flow dynamics of growth
Evaluating Financial Risk
Evaluating Financial Strategy
Identifying an acceptable candidate for leverage
Understanding a company’s financial strategy: Rating targets and shareholder value considerations
Corporate treasury objectives: Tenor matching, funding, and liquidity needs
Credit strength and its impact on access to markets
Measuring Financial Risk – Liquidity
Assessing liquidity and financial flexibility: On and off-balance sheet and cash-flow indicators
Understanding the limitations of traditional liquidity measures
Practical liquidity evaluation – sources and uses of cash
Using liquidity analysis to determine refinancing needs
Anticipating liquidity squeezes and evaluating resilience
Measuring Financial Risk – Solvency
Limitations of traditional ratio analysis
Using cash-flow statements to quantify debt servicing ability
Using discounted cash-flows to assess debt capacity
Distinguishing between debt and borrowing capacity
Anticipating future borrowing requirements and refinancing risk
Understanding the Credit Implications of Various Forms of Capital
Debt products: strong vs weak credits
Market demand effects on capital raised and pricing
Commercial paper: benefits and risks
Bank debt vs bonds: terms, conditions, and risks of subordination
Off-balance sheet financing: implications for debt providers
Equity: comparing investor and creditor perspectives
Assessing Management and Shareholders
Evaluating management competence and performance
Corporate aims and goals and their effect on creditworthiness
Evaluating shareholder structure, support, and influence
Managing the business in context of strategic goals
Step 4: Debt Structure
Framework for assessing debt instruments: profile, seniority, safeguards, and pricing
Unravelling corporate structures and identifying subordination
Evaluating safeguards