Advanced Credit Analysis & Financial Modelling
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Description
Course overview During the financial crisis, many banks and other financial institutions lost billions of dollars due to their failure to analyse 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 equity markets, knowing how to analyse credit risk remains key to avoiding losses and to maximising returns. Summary of course content Advanced financial analysis, including calculating key credit ratios for complex credit Advanced fin…Frequently asked questions
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Day 1 Advanced financial analysis, including calculating key credit ratios Adjusting for exceptionals, non-core items, derivatives, etc. Key accounting factors – revenue recognition, expense allocation, derivatives Calculating net debt – adjusting for quasi debt, cash collateral Adjusting for off-balance sheet items and entities Focus on operating cashflow not earnings Case studies: High yield and complex high grade accounts Advanced financial modelling in Excel Modelling amend and extend facilities Modelling for a new capital structure, e.g. following new shareholder value policies, acquisitions, leveraged buyouts, deleveraging Day 2 Advanced financial modelling in Excel (continued) Modelling new loan features, e.g. PIK toggles, amortisations, cash sweep, equity kickers Assessing refinancing risk Impact of Basel III and bank funding constraints The CLO markets Other factors increasing refinancing risk The importance of forecasting the credit profile at loan maturity Day 3 Credit enhancement methods Securitisation Typical structure and participants Creating cashflow ring-fencing measures Rating considerations Security and netting Type of security Offsetting of multiple credit exposures Credit linked notes Case study: Analysis of BAA's major ring-fencing mechanism to give lenders additional protection Parent and subsidiary rating linkage Credit assessment of: Non-recourse projects e.g. associates and joint-ventures Non-guaranteed subsidiaries Captive finance subsidiaries Fitch criteria for associates, j/vs, subsidiaries S&P criteria for associates, j/vs, subsidiaries, captive finance subs 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 Day 4 Corporate valuation for acquisition finance and distressed situations Including PE ratios, EBITDA multiples and DCF Case studies: To practice equity valuation and to cover the importance of equity valuations to lenders Deteriorating credits, potential and actual NPLs: Warning signs and strategies for minimising loss Case studies: Analysis of distressed credits that recovered and of those that went bankrupt
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