Corporate Credit Risk Analysis

IFF Training

How long?

  • 2 days
  • online

IFF Training

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About the course

Is your company being adequately meticulous and selective when making crucial credit risk decisions? This course will teach you how to take due care. You will examine historic cash flow to develop a framework for assessing business risk. You’ll learn to spot the warning signs of corporate distress, offer possible solutions and appreciate alternative financing structures and acquisition finance. The training will be conducted in the style of an interactive workshop, packed with practical activities. You will use case studies to analyse a typical credit approach, to identify credit problems and business risk issues. You’ll use excel to model corporate cashflows, model projections and analyse the risk factors. In groups, you will calculate a company’s optimum leverage and debt capacity and analyse the credit risk of a proposed acquisition.

What you will learn

  • Appreciate the basic parameters of credit risk principles
  • Develop a general framework for assessing business risks over a wide range of company types and business sectors
  • Show an advanced understanding of historic cashflow analysis and forecast cashflows
  • Realise the importance of financial risk evaluation
  • Identify the possible warning signs of corporate distress and understand the possible solutions
  • Understand the corporate objectives in terms of alternative financing structures, acquisition financing and appreciate the equity viewpoint when assessing credit risk

How You Will Learn

This course will take place in London for those online who are able to travel but if you can’t be there in person, a digital version is also available. Either way, you will have access to the same trainer, insights, content and practical sessions.

THE VIRTUAL CLASSROOM

We have been delivering online training for many years and know how to ensure the interaction is the same as if you were in the room.Class sizes will be capped to ensure every delegate will be guaranteed quality time with the trainer. You will be able to ask questions, give feedback and participate in the practical sessions.

THE FACE-TO-FACE COURSE IN LONDON

If you choose the London option, we want to assure you that we will comply with safety recommendations. We will cap our course numbers at 8 participants.This, and the way we will set up our training rooms, means you will have the space you need to maintain social distance. Hand sanitiser will be readily available on arrival and on desks.

YOUR SAFETY

Our number one priority is the safety of our delegates and colleagues, especially in the light of recent health concerns across the world. In addition to this, Informa AllSecure adds a further layer of health and safety best practice standards and guidelines, that will be followed at our events wherever applicable and possible. These measures will focus around four key areas: cleaning and hygiene, communications, protect and detect and physical distancing. They’re designed to provide you with confidence that at any Informa event around the world, we’re striving to provide the highest standards of safety, hygiene, cleanliness and quality

Course Agenda

Overview of the Credit Analysis Process

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

Syndicate Case Study: Analysing the Credit Risk of a Proposed Acquisition

Syndicate Case Study: Understanding the Principles of Credit Risk Analysing a Typical Credit Application

Current State of the Credit Market

  • Current issues regarding structured finance and credit
  • Review of changes in light of recent problems

Analysing Business Risks

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

Video: Identifying the Credit Problems of a UK Corporate

Syndicate Case Study: Identifying the Business Risk Issues for a Corporate Looking to Raise Funding

QUANTITATIVE RISK ANALYSIS

Cashflow Risk Evaluation

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

Syndicate Case Study: Analysing Corporate Cashflow of a Corporate Credit Case and Modelling Projections Using Excel

The Current Corporate Restructuring Climate

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

Group Exercise: Calculating the Optimum Leverage and Debt Capacity of a Company

Case Study: Identifying What Went Wrong in a Recent Corporate Distress Case

Corporate Capital Structure

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

Experts

John Richardson

John Richardson was previously the Managing Director of the corporate finance subsidiary of a London merchant bank, having previously worked in an advisory capacity with several high profile global investment banks. He holds the position of Programme Director, Visiting Faculty at Cass Business S...

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Corporate Credit Risk Analysis at IFF Training

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