Credit Risk Analysis

Students learn the principal concepts of credit risk analysis techniques using a structured approach and explore the management of credit risks under competitive and realistic conditions.

27-Oct-2008 -- 31-Oct-2008	New York	USD$4675
NY Institute of Finance - Midtown	9:00am - 4:30pm	Instructional Method: Group-Live
Instructor(s): [ Henry Pullman; ]	Mon Tue Wed Thu Fri	Level: Basic
		CPE Credits: 36

17-Nov-2008 -- 21-Nov-2008	Chicago	USD$4675
NY Institute of Finance - Chicago	9:00am - 4:30pm	Instructional Method: Group-Live
Instructor(s): [ Henry Pullman; ]	Mon Tue Wed Thu Fri	Level: Basic
		CPE Credits: 36

Credit and financial analysts, portfolio managers, credit officers, commercial bankers, risk managers and analysts.

No advance preparation required.

Students will be able to:

Appreciate the importance of the credit cycle
Have a better understanding of the current state of the credit markets
Discuss the various factors that drive credit quality
Gauge company performance using ratio analysis and complete a trend analysis
Analyze the ratios in context with the business and industry analysis and draw conclusions from the historical data
Understand the rating agency approach and the inherent differences with lender/investor analysis
Recognize the effects of accounting irregularities
Appreciate the analytical benefits and pitfalls of EBITDA
Understand the relationship between qualitative and quantitative aspects of a credit analysis
Compare peer performance
Recognize off-balance sheet risks and quantify them

Financial Statement Analysis or equivalent knowledge. Working knowledge of Excel.

Day 1 Session 1 ''What is Credit?'' Who uses it and why Review of recent high profile defaults - some common themes Review of credit market: Where we are in the credit cycle? Overview of default and recovery rates Class Discussion: What will be the likely impact of increased default volumes and increased credit market volatility? How will this affect your business? Session 2 Examine how companies fund themselves The risk return profile Short, medium and long term debt products from the banking and capital markets Which products are appropriate for which purposes and why? Asset based, seasonal and cash flow lending Exercise: For each borrowing need, identify the appropriate product or products Session 3 Examine preliminary loan screening What is the request? Identify the proposed loan terms Is the request within bank policy? Quick and dirty - purpose and payback Who is the borrower? What is the reason for the loan? Exercise: Participants review loan requests and identify sources of repayment Session 4 The Rating Agencies The rating agency approach - Rate through the cycle Why rating agencies lag the debt and equity markets The rating outlooks The vicious circle - How rating downgrades can trigger liquidity crises Exercise: The Credit Cliff Homework - Case Studies: Participants are introduced to the case studies credit cliff	Day 2 Session 1 Define and examine industry and corporate strategy The importance of using a Risk Evaluation Framework Using established industry and business analysis techniques from the credit perspective SWOT, Porter Company overview: History, organizational structure, product lines, customer base, suppliers, market position, management and overall strategy Management is key Characteristics of effective management Exercise: Compare and contrast three telecoms: France Telecom, British Telecom, AT&T - which appear to have the strongest industry fundamentals? Session 2 Review accounting and historical financial statement analysis Income statement - revenues, cost of sales and profitability Balance sheet - capital expenditures and working investment, asset efficiency, liquidity and leverage Exercises: The mixed up balance sheet - Consolidation Session 3 Ratio analysis Exercise: Company identification using ratios What can ratios measure? Profitability, performance, liquidity, solvency, leverage, efficiency, cash flow Exercise: Interpreting the telecom ratios Session 4 Review and apply cash flow analysis Creating and interpreting cash flows Differences between company produced and derived cash flows Exercise: Calculating profit versus cash flow Session 5 Analysis of cash drivers Operating cash flow, net operating cash flow, EBITDA: when Pitfalls of EBITDA Working capital analysis Capex analysis (maintenance vs. growth) Complications of analyzing cash flows Exercise: Calculate a simple cash flow statement

Day 3 Session 1 Early Warning Signs and Creative Accounting Non-financial signs Financial signs - income statement, balance sheet and cash flows Bank internal warning signs Creative Accounting Exercise: Searching for early warning signs in Amerco's annual report Session 2 Industry and company forecasting Projection analysis Introduction to the model Key factors driving forecast statements Overview of model forecast inputs Case company: Participants are introduced to the case company model and create a base and downside case Session 3 Define and examine debt capacity Calculating debt capacity from projected cash flows Compare debt capacity to credit request Alternative sources of repayment Case Company: Participants use the model to assess debt capacity	Day 4 Session 1 Loan structuring Who is the borrower? Facility structure Corporate structure Seniority Structural subordination Exercise: Loan structuring Session 2 The challenge of covenants Financial covenants Non-financial covenants Setting covenants - at what level Covenant tracking - when to see the client Exercise: Setting covenants for Xerox Session 3 Examine different types of risk Credit Market Operational Liquidity Country Macroeconomic Exercise: Review several banks annual report discussions on risk Session 4 Discuss finalizing the loan - A structured approach The written credit proposal Key risks and mitigants Relationship strategy The economics of credit, profitability/RAROC Exercise: Participants comment and critique a written credit proposal Homework: Structuring the loan and setting covenants for the case studies

Day 5 Session 1 Examine and review syndicated loans Role of the players and the local market Key benefits of syndicated loans Loan syndication procedures Documentation benefits and traps Exercise: Calculating profitability pre and post syndication Session 2 Structured credits LBO's, MBO's Why use leverage? Optimal level of debt? Structuring Differences Exercise: Leverage finance case study Session 3 Complete group case studies - Mock Credit Committee Presentation of Borrower and Key Risks Presentation of past and likely future performance Proposed Facility Structure Proposed Covenants Instructor critique of presentations for clarity and analytic focus

Clients who register for this course will receive a complimentary 6 month subscription to the Financial Times and FT.com. The Financial Times is the world's most respected financial newspaper providing a broad assessment on finance, business and the industrial sector. Subscriptions will start within 6-8 weeks of the application process, and are limited to one per client. For questions about your subscriptions call 800-628-8088 or email uscirculation@ft.com. US and Canada enrollees only.

Lunch included for all students taking day classes.

Course Category

Credit Risk Analysis

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