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Advanced Credit Analysis

Learn advanced analytical and forecasting techniques for assessing financial, structural and documentation risks inherent in credit exposures

The rich blue and pink hues of a cluster of leaves  are rare and beautiful sight

A two-day course

Day 1

This advanced course analyses complex financial statements; using financial analysis to improve risk assessments

Analysing the Income Statement

  • Calculating underlying earnings and EBITDA
  • Dealing with EBITDA add-backs, exceptional items, hedging gains/losses, restructuring costs, “one-off items”, capitalised expenses, gains/losses on disposals etc to work out underlying EBITDA
  • Defining finance expense and finance income:
    • Capitalised interest, PIK, discontinued items, derivative gains & losses, accretion expense, quasi-debt and off-balance sheet liability expenses
  • The impact of IFRS 16 Leases
  • Dealing with equity-accounted entities and NCI
  • Detailed ratio analysis
  • Finding risks in the income statements

Analysing the Cash Flow Statement

  • Cashflow statement layouts and how definitions vary
  • Defining and understanding operating cashflow:
    • Adjusting for non-cash items, capitalised expenses, NWC etc
  • The investing section:
    • Analysing investment spending
    • Adjusting investment spending for leases and capitalised interest
    • Assessing M&A deals
    • How to deal with changes in financial assets over 12 months of maturity
  • The financing section:
    • Analysing changes in the firm’s funding structures
    • Understanding changes in collateral for derivatives
    • How is the firm financing investing, NWC, dividends, debt/lease repayments?
  • Calculating and analysing cash flow ratios (interest cover, debt service cover (DSCR), years to repay gross debt, investment cover, dividend cover, cash conversion ratios, RCF/net debt, FCF/net debt)

Analysing the Statement of Financial Position

  • The tangible asset base, valuation basis, impairments and revaluations
  • Understanding intangible assets including goodwill
  • Understanding other assets, such as equity-accounted entities and financial assets
  • More complex definitions of net working capital
  • Calculating a comprehensive definition of indebtedness, including PIK, receivables funding, supplier financing, hybrids, derivatives, on and off-balance sheet leases, debt in non-consolidated entities and quasi-debt
  • Dealing with provisions, deferred tax, pension deficits, shareholder loans
  • Calculating net debt, considering financial assets, restricted cash, pledged cash, ring-fenced cash and seasonality
  • Considerations for Liquidity Analysis
  • Calculating and analysing balance sheet ratios (gross and net leverage, working capital ratios, asset turnover, ROIC, liquidity, capital structure, debt maturity profile)

Adjusting Credit Assessments for Different Types of Subordination, Group Structures and Security: ESG Considerations

  • Parent and subsidiary rating linkages
  • Credit assessment of groups, the importance of ownership, analysing a group
  • Proportional debt, earnings and cashflow of entities that are not wholly-owned
  • Non-recourse projects eg associates and joint-ventures
  • Non-guaranteed subsidiaries
  • Captive finance subsidiaries
  • Notching for structural and contractual subordination, credit enhancement and other factors
  • Incorporating ESG into credit assessments and ratings


Day 2

Impact of Corporate Finance Transactions on Credit Quality

  • Mergers, acquisitions, disposals, breakups, demergers, subsidiary IPOs
  • Is the impact positive, negative or neutral?
  • Case studies: impact of M&A on credit quality

Leveraged Buyouts

  • Rationale to LBOs
  • Structuring an LBO – sources and uses of funds
  • Modelling for the new capital structure
  • Matching debt to cash flows and the asset base
  • Cashflow based lending versus asset-based lending
  • Modelling for new equity injections and dividend recaps
  • Modelling new loan features eg PIK, amortizations, equity kickers, shareholder loans
  • Structuring the debt to include flexibility for different cashflow outcomes
  • Reviewing a comprehensive LBO model and applying scenario analysis
  • A quick method of modelling and analysing an LBO
  • Assessing returns to equity and subordinated lenders

Documentation and Covenants

  • What is the purpose of the loan and is it related to the repayment sources?
  • Definitions, reps and warranties, conditions precedent, negative pledge
  • Covenant-lite and covenant-loose:
    • Definitions and trends
    • The $1 debt test, freebie baskets, builder baskets, carve-outs, EBITDA add-backs, equity cures, RP-for-debt toggles, call protections, MFNs, restricted versus unrestricted subsidiaries, incurrence vs maintenance, permitted liens etc
  • How weak covenant packages can disadvantage lenders:
    • Priming, diluting, structurally subordinating & collateral sharing
  • Rating agency covenant quality scores
  • MAC clauses, events of default, cross-default
  • The nine key covenants for event and recapitalisation risks

During the course, we reference and analyse a range of case studies including Casino, Bayer/Monsanto, EliLilley/Loxo, Campbell, Anheuser-Busch InBev, Pizza Express, Power Solutions, PureGym, and Refinitiv.

Spanning fifteen years, Redcliffe's specialist has worked as a financial trainer and consultant with major training firms. Covering basic and advanced corporate credit analysis and valuation, distressed debt, financial analysis and financial modelling, this trainer provides a wealth of expertise.

Recent assignments include the European Central Bank, the European Investment Bank, the European Bank for Reconstruction and Development (EBRD), DBS in Singapore, Siemens, Deloitte, HSBC, Carnegie Bank, Gibbs Business School in Johannesburg, Bahrain Institute of Business Finance, Bank of China, BBVA, the African Development Bank, Rand Merchant Bank, Hamburg Central Bank and Mizuho Bank. Delegates range from graduate trainees to board members.

A former Executive Director of CSFB and Lehman Brothers, this trainer spent seventeen years working as an investment banker in Europe and the US. After graduating from the London School of Economics with a degree in Economics, she joined Kleinwort Benson Ltd as a graduate trainee. She worked initially on analysing, structuring and investing in US LBOs and MBOs and also US high-yield debt.

Working in Kleinwort Benson’s European corporate finance department thereafter, this expert developed further industry experience. Her knowledge includes IPOs, mergers, acquisitions, disposals and corporate restructurings, with a particular focus on receivership and bankruptcy situations. Moving to CSFB’s fixed income department as the lead European corporate credit analyst, she covered new issues and secondary trading whilst advising clients on their fixed income portfolios.

Head-hunted by Lehman Brothers as lead corporate credit analyst, Redcliffe's trainer specialised in high-grade and cross-over telecoms. This included new issuance and advising proprietary traders and fund management clients on their investments. She has also worked as an expert witness on financial trials and as an advisor on private equity transactions.

Advanced training shows you how to:
  • Understand and apply detailed ratio and trend analysis to complex financial statements that include quasi-debt and off-balance sheet liabilities.
  • Learn how to assess key risks and warning signs from the financial statements and notes.
  • Understand the main considerations for establishing ratings, including parent/subsidiary rating links and notching adjustments for ownership, structural and contractual subordination and security.
  • Understand how ESG is increasingly important in credit analysis.
  • Analyse the impact of corporate finance activity on credit quality.
  • Analyse, structure and model leveraged buyouts.
  • Understand certain aspects of credit documentation, with a particular focus on covenants.

  • Our course covers a range of more advanced credit topics, including parent/subsidiary/affiliate rating linkages, credit enhancement methods, the credit impact of M&A (Merger and Acquisition) transactions, LBOs and documentation, with a focus on covenants.
  • This training combines financial theory with recent transactions and practical examples designed to be relevant to delegates' actual work experience.
  • We examine recent LBO and M&A deals to understand the rating agencies and the market’s approach to assessing a business, financial and other risks.
  • Delegates will be given a comprehensive LBO forecasting model that incorporates key credit statistics, scenario analysis, data tables and returns analysis.
  • Our trainer has over fifteen years of dedicated industry experience.

This course provides essential skills and learning points for:
  • Commercial bankers, private credit officers and relationship managers
  • Fixed-income credit analysts
  • Fixed-income fund managers
  • Fixed-income credit traders
  • Fixed-income credit salespeople
  • Debt capital markets specialists
  • Investment bankers, particularly those specialising in distressed debt reorganisations and M&A transactions
  • Treasurers and financial decision-makers in corporations
  • Compliance officers
  • Management consultants

Advanced training in this topic area is vital. Through every business cycle, banks and other financial institutions lose billions as a result of their failure to analyse credit risk correctly and foresee downside risks. Even if these institutions do not suffer direct financial losses due to default/market movements, they may be receiving an inadequate return for the risks involved.

At Redcliffe Training, our course teaches delegates how to analyse corporate credit risk and assess an appropriate return. Given the increasing use of leverage by both the private and public equity markets, combined with heightened sovereign/geopolitical risks, in-depth credit analysis is essential to avoiding credit and currency losses.

Please note this course does not extend to the investigation of banks, insurance companies or structured vehicles.

Have this course presented In-House

  • On a date, time and in a location of your choice
  • Topics expanded or deleted to your bespoke requirements

Have this course pre-recorded

  • Full course recording edited exclusively for your company
  • Files converted to enable housing on your LMS
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