Leveraged Finance and High Yield Credit Risk

Fitch Learning

Fitch Learning


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Who should attend

Case studies and exercises are drawn from a range of industries and regions and are focused on sub-investment grade companies operating in mature or developing financial markets. Participants in need of an introduction of financial analysis are advised to enroll in the 2-day course covering the Fundamentals of Corporate Financial Statement Analysis prior to attending this course. This course is especially suitable for fixed income analysts or investment managers interested in understanding the credit risks of high yield issuers and instruments.

About the course

The goal of this two-day course is to enhance analytic skills needed to assess high yielding sub-investment grade and cross-over issuers and instruments. This is a highly interactive course 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 credit analysis and understand how credit fundamentals can drive relative value
  • Identify factors that might change a company's credit standing, and thus the value of the underlying security, by anticipating upward and downward credit migration
  • Evaluate the performance of a sub investment grade company based on a qualitative approach, backed by appropriate quantitative analysis (using ratios and cash flow tools)
  • Understand how market conditions have affected debt structures in the market place for high yield bonds and leveraged loan transactions.

Analytical Overview

Structured framework - Credit risk as a driver of relative value

  • 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

Market dynamics

  • Market trends for leveraged transactions: leverage multiples, capital structures, parties and instruments
  • Rationale of high yield/sub investment grade debt: who are the issuers, who are the investors, why high yield
  • Market indicators of credit risk: Credit ratings, bond spreads, ratings curves, CDS pricing and equity price movements

Creditworthiness of Non-Investment Grade Issuers

  • Structure of analysis: qualitative and quantitative factors
  • Macro-economic and industry dynamics
  • Application: Identify sectors by different capital structures and return profiles
  • Issuer's commercial viability and competitive positioning
  • Financial fundamentals in analyzing business and financial risk: using ratio and cash flow tools
  • Appropriateness of the capital structure
  • Financial flexibility and refinancing risk
  • Application: compare several issuers operating in a similar sector
  • Debt capacity model to quantify debt servicing ability
  • Creditworthiness and relative risk vs. reward
  • Application Illustration Case Study: (send as pre course reading) Assess the credit worthiness of a NIG borrower using the Fitch Ratings Navigator

Structure of Leveraged Transactions


  • Legal, structural and economic subordination
  • The role of security, guarantees and third party support
  • Borrowing base Loans, first and second lien security, super senior loans
  • Application: assess structural subordination of various instruments issued by one group


  • Restrictive covenants
  • Effective financial covenants, covenant ‘lite’
  • Application: assess suitable covenants for different scenarios


  • Default and recovery statistics in leveraged finance
  • Market indicators (bond market yields, CDS) and ratings as a basis for comparison

  • Debt and hybrid products

  • Senior secured (or unsecured) debt instruments:

    • Alphabet tranches, uni-tranche, borrowing base
    • Subordinated debt: Second lien, mezzanine loan, hold co-shareholder loan
    • Specific features: Zero coupon, PIK, hold co-bond
  • Hybrid capital market products

    • Perpetual debt
    • Preference shares
    • Convertible debt
  • Application: worked examples relating to several funding products.

Cross Over Credits, ‘Fallen Angels’ and ‘Rising Stars’

  • Credit transition or migration data
  • Drivers affecting movements across the IG barrier:
    • Macro-economic trends including sovereign risk and structural sector changes
    • Leverage and refinancing risk
    • Mergers and acquisition activity
    • Recapitalisation, share buy backs
    • Corporate governance, parental support
  • Application: case study/ies.

Videos and materials

Leveraged Finance and High Yield Credit Risk at Fitch Learning

From  GBP 2 295$2,995
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Coursalytics is an independent platform to find, compare, and book executive courses. Coursalytics is not endorsed by, sponsored by, or otherwise affiliated with any business school or university.

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