Course description
Corporate Credit Analysis
Corporates in many parts of the world, particularly Europe and the US, are faced with multiple challenges which make their operating outlook even more difficult than during the financial crisis of 2008/09. Following the challenges of Covid-19, lenders and investors are once again faced with widespread and material credit deterioration, across sovereigns, corporates and other sectors. A combination of strong cost inflation, significantly higher energy costs, higher and rising interest rates, political uncertainty, worsening geo-political risks and falling consumer demand are making credit analysis even more challenging. The level of uncertainty and disruption look set to remain high for some time. Thus, it is even more important for creditors and investors to understand how to analyse a range of credit risks, in order to avoid credit losses and to earn an adequate risk/reward profile from their exposures.
Upcoming start dates
1 start date available
Who should attend?
Who Should Attend?
- Credit analysts on the sell-side
- Credit counter-party risk analysts
- Fixed income fund managers
- Asset management credit analysts on the buy-side
- Debt capital markets executives on the sell side
- Investment bankers
- Fixed income/credit traders
- Fixed income/credit sales people
- Private equity executives
- Treasurers
- Equity analysts and strategists
- Compliance officers and internal audit
- Equity sales and traders
- Corporate finance lawyers
Training content
Day 1: Morning
Background to credit analysis
- What is credit analysis?
- How is credit quality and exposure measured?
- Sources of debt service
- Creating a framework for credit analysis
Income statement analysis from a credit perspective
- Analysing and forecasting revenues
- What are the key revenue drivers and what are their trends and risks?
- What are the key cost drivers and what are their trends and risks?
- Fixed and variable costs
- The impact of hedging - currencies, interest rates, commodities
- Calculating underlying earnings and EBITDA
- Dealing with exceptional items, hedging gains/losses, restructuring costs, “one-off items”, gains/losses on disposals etc to work out underlying EBITDA
- Defining finance expense and finance income
- The impact of IFRS 16
- Dealing with equity-accounted entities and NCI
- Taxation issues
Day 1: Afternoon
Cashflow statement analysis from a credit perspective
- The main sources and uses of cashflow
- The level, volatility and predictability of the firm’s cashflow
- Deriving operating cashflow
- including changes in NWC, and dividends from equity accounted entities
- Deriving net operating cashflow – deducting net finance expense and tax paid
- Defining cashflow relating to investment spending, gross and net
- Defining cashflow relating to financing activities
- Does the firm generate sufficient cashflow to service debt and fund capex?
- Are new investments adding value?
- How are cash shortfalls funded?
- Is the firm diverting too much cashflow to shareholders?
- Reorganising the cashflow statement to show CADR
Day 2: Morning
Balance sheet analysis from a credit perspective
- Consolidation policies
- The nature of the asset base:
- PP&E, intangibles, equity accounted entities and investments current assets
- Financial assets - cash, investments, derivative assets, cash pledges, restricted cash,
- How are the assets valued? What is the outlook for impairments or revaluations?
- The security value of assets
- What are the assets lives and what is the outlook for maintenance and expansionary capex?
- Understanding the firm’s capital intensity and operating leverage
- Current liabilities including short term debt
- Understanding NWC
- Long term liabilities
- Provisions, bank debt, bonds, derivative liabilities, hybrids, supplier finance, leases, shareholder loans, pension deficits, deferred tax liabilities
- Off balance sheet liabilities:, short term operating leases, contingent liabilities, securitised receivables etc
- Calculating an expanded definition of gross and net debt
- Liquidity analysis
Day 2: Afternoon
- Modelling and forecasting in Excel
- Overview of good spreadsheet practices
- Creation of a full financial forecasting model
- Assumptions, income statement, balance sheet and cashflow statement
- Creation of macro and firm-specific assumptions
- What are the critical value drivers? Can they be modelled?
- Embedding scenario analysis in the forecasting model
- Modelling fixed and variable costs
- Structuring the debt to include flexibility for different cashflow outcomes
- Waterfall debt repayment schedule
- Delayed amortisation, accordian, PIK, PIYC
- Debt repayment and roll-over strategy
Day 3: Morning
- 5a Leverage and group structure analysis
- 5b Qualitative credit analysis
Day 3: Afternoon
- 6a Credit ratings
- 6b The impact of corporate finance transactions on credit quality
Day 4: Morning
Overview of leveraged buyouts
- Rationale to LBOs
- What makes a good LBO candidate?
- Recent trends in the LBO market
- Purchase multiples
- Share of equity funding and debt structures
- Typical covenants
Day 4: Afternoon
Credit documentation – focus on covenants
- The construction clause
- What is the purpose of the loan and is it related to the repayment sources?
- Aims of covenants
- What is covenant loose?
- What is covenant-lite?
- Recent trends in covenants in the bond and syndicated loan markets
- Restricted versus non-restricted subsidiaries
- Financial and non-financial covenants
- The importance of definitions
- Testing, baskets and carve-outs
- Value maintenance covenants
- Leverage and limits of indebtedness
- Interest cover
- Limitations on dividends
- Limitations on investment spending
- Limitations on M&A and disposals
- Limitations on sale and leasebacks
- Change of ownership or control
- Grace periods
- Freebie baskets
- Mulligan clauses
- Carve-outs
- How borrowers have exploited carve-outs to put existing lenders at a disadvantage
- Security
- Security parties
- Type of security
- Enforcement
- Cross-collateralisation
Costs
The Course fee: 4495 +VAT
Certification / Credits
After completing this course, participants will learn:
- how to apply a structured approach to corporate credit analysis
- how to undertake detailed financial risk analysis
- how to calculate key credit ratios
- how to undertake financial modelling and forecasting in Excel
- how to apply sensitivity analysis
- how to analyse leverage in detail, including the determinants of leverage
- how to analyse structural factors such as ownership, double leverage, structural subordination and contractual subordination
- about about credit ratings and how they are determined
- how to analyse the impact of corporate finance activity on credit quality
- the importance of qualitative risk analysis: sovereign, industry and company specific
- how to analyse and model leveraged buyouts
- about credit documentation and key covenants
Why choose Euromoney Learning?
4.6/5 rating on course check for service
60,000 professionals trained across public courses
80+ countries where training is delivered
Contact this provider
Euromoney Learning
8 Bouverie Street
EC4Y 8AX London
Euromoney Learning
At Euromoney Learning, we understand that learning doesn’t start and end when you leave the classroom. We know that the financial markets never stand still, and that technology has both simplified and added complexity at a break-neck pace. That’s why...
Ads