Available dates

Dec 2—5, 2019
4 days
Singapore
USD 4395
USD 1098 per day
Dec 2—5, 2019
4 days
New York, New York, United States
USD 4395
USD 1098 per day
Dec 2—5, 2019
4 days
Frankfurt, Germany
EUR 3995 ≈USD 4416
EUR 998 per day
+13 more options

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About the course

The overall goal of this four-day workshop is to enhance analytic skills. Participants will use a structured and systematic approach to evaluate the credit standing of a company and assess the relative attractiveness of the risk-return profile of the investing/lending proposition. This is a highly interactive workshop where case studies and exercises are used to illustrate key learning points, allowing participants to apply the concepts acquired during the workshop to a real-life scenario. Participants are encouraged to be focused and concise in developing and articulating credit judgement.

Key Learning Outcomes:

  • Apply a structured approach to assess the creditworthiness of a corporate borrower
  • Evaluate the performance of a company based on qualitative and quantitative frameworks and tools
  • Identify the key factors that drive a company's future performance and evaluate the likely impact on its credit standing
  • Use a cash flow approach to ascertain a company's ability to service/refinance its debt as it comes due
  • Use appropriate market indicators, where available, to understand refinancing risk and the market view on a credit.

Case studies and exercises are drawn from a range of industries and regions and where possible include investment grade and sub-investment grade companies operating in mature and /or developing financial markets. We offer a separate program focusing on analyzing commodity producing and trading companies. Participants in need of an introduction of financial analysis are advised to enroll in the 2-day program covering the Fundamentals of Corporate Financial Statement Analysis prior to attending this Corporate Credit Analysis workshop.

Analytic Overview

  • A 4-step approach to any debt funding transaction: Purpose, sources of repayment, risk to repayment and debt structure.
  • Application: Identify the true purpose of borrowing, the source(s) and risk of repayment, and the expected structure of the debt for several companies.
  • Risk to Repayment: Macro Considerations, Business Risk, Financial Risk, Management and Ownership.

Macro considerations

Operating environment

  • Macro-economic drivers which can significantly influence cash-flow profiles for companies operating in developing markets:
  • Country risk and sources and sustainability of economic growth
  • Application: Identify countries in different stages of development and levels of perceived sovereign risk
  • Key macro vulnerabilities of developing markets: Volatility of foreign exchange and commodities, risk of high inflation, government intervention and general political risk
  • Application: Assess FX exposures in several scenarios.

Sector

  • Industry structure, competitive forces and effect of industry growth drivers on company performance
  • Sales growth, including effect of inflation, foreign exchange and commodity fluctuations, operating profit margins, working capital requirements and capital expenditure
  • Critical success factors needed to be addressed to sustain a competitive advantage in the future
  • Application to the illustration case study (pre-course assignment): Key macro threats, sector risks and critical success factors
  • Application: Identify asset configurations, funding structures and earnings of companies in different sectors.

Business risk

Assess a company's business strategy to understand the asset investment needs and commercial viability of a company and their effect on the quality and stability of cash flows:

Business strategy

  • A company's markets, products, services and competitive position
  • Corporate actions underpinning its growth strategy
  • Stages in the ‘life cycle’ of a company and expectations of cash flow profile
  • Application to the illustration case study (pre-course assignment: To what extent does the company’s business strategy address sector's critical success factors?

Earnings dynamics

  • Strategic direction of the firm: Sales and operating profitability, sources of operating cash-flow, trend and peer analysis
  • Quality and stability of the income stream and the cost base of the firm
  • Effect of foreign exchange and commodity price fluctuations on profitability
  • Looking beyond EBITDA at funds from operation and cash flow
  • Ratio and cash flow analysis to evaluate performance within a group of sector peers
  • Different accounting conventions and potential misleading reporting practices
  • Application: Analysis of the earning dynamics for a company with FX and commodity exposure
  • Illustration case study: Using peer ratio and cash flow analysis to assess earning dynamics.

### Asset management

  • Cash conversion cycle and effect on asset needs
  • Ratio and cash flow analysis to evaluate asset efficiency and asset investment need
  • Impact of increasing asset investment need on cash flow for high growth companies
  • Application: Using key asset efficiency ratios
  • Application to the illustration case study: Using peer and ratio analysis to assess and compare asset management and effect on current and future cash-flow generation.

Forecasting and sensitizing key cash flow drivers

  • Forecast operating performance and asset investment requirements using a basic excel model
  • Application to the illustration case study: Set scenarios to test the robustness of future cash generation and key vulnerabilities.

Financial risk

Evaluate the appropriateness of a company’s funding structure given the operating environment, management and shareholder goals and overall business risk and an evaluation of its debt service ability and refinance risk.

Financial strategy

  • Corporate treasury objectives: Cost of capital and shareholder’s return
  • Access to sources of funding available in mature and developing financial markets.

Solvency and Debt Service Capability

  • Funding structure including off balance sheet obligations
  • Debt servicing ability using cash flow analysis
  • Ratio and cash flow analysis to evaluate the funding structure and debt servicing capability
  • Application: Assess the degree of financial risk and debt servicing for several companies operating in a similar sector
  • Debt capacity assessment: present value of future cash available for debt service.

Financial Flexibility and Liquidity

  • Funding instruments or funding structures potentially increasing the refinancing risk and overall financial risk
  • Measuring liquidity or payment readiness
  • Application: Assessment of financial flexibility
  • Illustration case study: Using peer analysis and cash flow forecast to assess overall financial risk, debt service capability and refinancing risks.

Management and Ownership

  • Ownership / shareholder structure, support and influence
  • Shareholder return requirements and measures used
  • Corporate governance and transparency
  • Assessing leadership teams: Structure, Strategy, Skills, Systems
  • Application to the illustration case study: Identify management strengths and weaknesses; any issues regarding shareholder structure/support.

Debt Structure

Overview of main elements of debt structures. (These topics are covered in greater detail in our ‘Capital structures and debt products’ course)

  • Ranking: Different ways to achieve seniority or pari passu ranking vs. other capital providers
  • Safeguards: The use of financial and non-financial covenants to mitigate risk
  • Pricing fundamentals: Bond and loan prices
  • Market Indicators of credit risk: credit ratings, bond spreads vs. rating curves, share price.

Group Case Study (Studies)

The aim of the final group case study is to allow participants to apply the framework and tools of credit analysis to a company and make a concise and conclusive presentation to the group on the final day of the course:

  • Preparation and presentation of a complete credit analysis in small groups of 2 to 5 participants
  • Companies used for the group case studies vary per location of the course.

Who should attend

We offer a separate course focusing on analyzing commodity producing and trading companies. Participants in need of an introduction of financial analysis are advised to enroll on the Fundamentals of Corporate Financial Statement Analysis course prior to attending this Corporate Credit Analysis course.

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