Overview of the Credit Analysis Process

• Objective: To establish the basic parameters of the credit risk principles

• Risk and return dimensions

• Country and corporate risk issues

• Credit default rates and risk grading

• Fundamental principles of credit risk analysis

• Balancing the quantitative and qualitative aspects of risk

• A structured analysis framework for credit

• Rating processes

• External rating agencies – Moodys, S&P, Fitch

• Internal ratings applications

Current State of the Credit Market

• Current issues regarding structured finance and credit

• Review of changes in light of recent problems

Analysing Business Risks

• Objective: To develop a general framework for assessing business risks over a wide range of company types and business sectors

• Macro-environmental risk analysis; cyclical/mature/growing

• Strategic evaluation using stakeholder analysis, four gods of management, PESTI, Porter 5 Forces model

• Assessing competitive position

• Resource audit using 7Ms

• Company/product portfolio evaluation and diversification using the product portfolio BCG matrix

• Market environment analysis

• Generic competitive strategies

• Strategic options using Ansoff matrix

• Market/product lifecycle and the 4Ps of marketing

• Value chain and peer group assessment

• Internal operational and management assessment

• Track record, attitude to risk, relationship with shareholders

• Force field analysis and understanding change management issues

• Combining the analysis using a SWOT matrix

• Developing a qualitative analysis framework

PRESENTATION

Video

• Identifying the credit problems of a UK Corporate

Cashflow Risk Evaluation

• Objective: To ensure an advanced understanding of historic cashflow analysis, forecast cashflows and the importance in financial risk evaluation

• The dynamic cashflow cycle in a company • Untangling the cashflow statement

• Linking cashflow and historic ratios

• Evaluating repayment ability on a cashflow basis

• Cashflow cover ratios and repayment risk, EBITDA cover, DSCR and other metrics

• Moody’s and S&P calculation of FFO and use of cashflow analysis

• Calculating cashflows when there is no cashflow statement

• Understanding the cashflow statements of other countries

• Cashflow and corporate capital structure

• Debt vs. equity decisions in the capital structure and cashflow impacts

• Developing a model for cashflow projections

• Cashflow sensitivity analysis – identifying the key cashflow drivers

• Linking cashflow generation to strategy and investment decisions

• Key cashflow financial performance indicators

The Current Corporate Restructuring Climate

• Objective: To identify the possible warning signs of corporate distress and understand the possible solutions

• Review of the current problem sectors

• What are the recurrent themes?

• Identifying both the qualitative and quantitative warning signs of corporate failure

• Separating the causes from the symptoms

• Sector specific problems involving restructuring

• Restructuring framework

• Proactive

• Defensive

• Distress

• Legal options

• Differences across different regimes

• Legal reorganisation – in court or out of court solution?

• Stakeholders with special interests – suppliers, pension trustees,leaseholders

• Liquidation, sale or debt restructure

• Role of vulture funds/hedge funds

• Review of the key issues in corporate restructuring

• Liquidity or viability problem?

• Identification of key stakeholders

• Leveraging and deleveraging

• Optimising the leverage structure

• Adjusting the cost of debt and equity for leverage

• Recaps, debt and equity buybacks

Corporate Capital Structure

• Objective: To understand the corporate objectives in terms of alternative financing structures, acquisition financing and to appreciate the equity viewpoint when assessing credit risk

• Structuring the junior/senior debt

• Hybrid debt and equity issues in capital structure

• Mezzanine debt structures

• Use of PIK structures

• Warrants and equity ratchets

• Understanding the term structure of risk

• Using asset securitisation structures to obtain off balance finance

• Understanding credit enhancement structures and risk transfer

• Project finance structures

• Acquisition finance