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Corporate Credit Risk Analysis School

An intensive 3-day course combining practical financial analysis, credit risk assessment, and strategic advisory skills

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A three-day course presented In Person (London)

In-house pricing available – often more cost-effective for teams of 10+
pdf Download:   Course Outline

The course will run in Central London over 3 days, from 09:30 to 16:30, with a lunch break and two coffee breaks.

Day One

Section 1: Quantitative analysis – how to assess the group’s credit profile using the financial statements and notes

1.1 Revenues, earnings and net finance expense

  • Recommended adjustments to reported financial metrics to help gauge a firm’s true credit profile
  • Analysing revenue trends – what is driving growth or decline?
  • What trends, risks and opportunities do the divisional and geographical analysis show?
  • Assessing underlying earnings and EBITDA
  • Adjusting for exceptional and non-recurring items, equity accounted profits/losses and non-cash and non-core earnings
  • Adjusting reported finance expense for capitalised interest, PIK interest, discontinued items, on and off balance leases, hybrid securities etc
  • Adjusting reported finance income
  • The impact of IFRS 18, effective Jan 2027
  • What are the key risks and trends in the income statements?
  • Does the statement of other comprehensive income give any insights?
  • What are the credit implications of the firm’s dividend and share buyback policies?
  • Case studies: calculating key financial metrics; adjusting and calculating key credit ratios (growth, margins, interest cover, dividend cover)

1.2 Analysing key line items in the statement of financial position

  • Understanding the group’s asset base and capital intensity
  • How is the asset base funded and what improvements could be made?
  • What are the firm’s investment requirements and how should these be funded?
  • Understanding the group’s net working capital requirements including seasonality
  • How is NWC funded and how could this be improved?
  • Analysing the firm’s financial liabilities, quasi-debt and non-financial liabilities
  • Making adjustments to reported net debt for on and off balance sheet leases, retirement deficits, derivatives, discontinued items, hybrid securities, off balance sheet amounts, reverse factoring, put options, securitised assets and financial assets etc
  • Analysing debt capacity, the debt maturity profile, the debt currency profile, sources of borrowings and exposure to changes in interest rates
  • Dealing with over-due liabilities (tax, suppliers, VAT) and provisions
  • Assessing liquidity sources and uses and the scope for a liquidity crisis
  • Understanding the book value and market value of equity
  • What are the key risks and trends in the balance sheets?
  • Case studies: calculating key financial metrics; adjusting and calculating key credit ratios (asset turnover, ROIC/ROCE, leverage, liquidity, net working capital efficiencies)

1.3 Analysing key line items in the cash flow statement

  • The impact of IFRS 18 effective January 2027
  • Defining different measures of cash flow
  • Moving from earnings to operating cash flow
  • Understanding the key sources and uses of cash flow and the credit implications
  • Is operating cash flow sustainable; how much is derived from NWC changes and one-off sources?
  • Can the firm cover interest, tax, investment spending, provisions and dividends?
  • Reorganising the cash flow statement to calculate key measures of cash flow
  • Reviewing the investing section – adjusting for leases and long term financial investments
  • Reviewing the financing section – adjusting for leases, assessing margin calls and analysing sources of funding
  • Case studies: Calculating key financial metrics; Adjusting and calculating key credit ratios (interest cover, debt service cover, dividend cover, investment cover, cash flow generation efficiency, liquidity, dependence on external funding)

1.4 Spotting red flags in financial statements

  • Differentiating between accounting fraud, aggressive accounting and incompetent accounting
  • What is the purpose of the fraud or aggressive accounting?
  • Common red flags in the income statement
  • Common red flags in the balance sheet
  • Common red flags in the cashflow statement
  • Qualitative red flags
  • Can AI help spot creative accounting?
  • Case study: delegates are given a range of financial statements and try to spot qualitative and quantitative red flags

Day Two

Section 2: Using historic performance analysis and client budgets for forecasting

  • Analysing underlying historic performance; divisional analysis, adjusting for M&A, disposals, currencies
  • Evaluating the key value drivers of earnings and cashflows (revenues, divisional analysis, operating leverage, fixed and variable costs, commodities, currencies, customer concentration, other operating income, equity accounted entities, NCI, interest rates, hedging, taxation, dividend payout rates, capex, NWC, leases)
  • Using management budgets and forecasts - are they too optimistic?
  • Can historic results be extrapolated into the future?
  • What are the factors that cause deviations from historic trends? (M&A, disposals, other strategic initiatives, change in the scope of consolidation, macro and industry changes)
  • Including the impacts of new management initiatives
  • Understanding and applying operating leverage
  • The impact of maturing fixed rate debt and interest rate changes
  • Case studies: reviewing and adjusting 3-statement financial models
  • Running scenarios based on the key cash flow drivers and risks
  • Running scenarios based on different capital structures

Section 3: Understanding corporate value creation and strategic drivers 

3.1 How clients create value-added and make investment decisions

  • How relationship managers can discuss with clients the company’s performance, investment initiatives and strategic outlook 
  • How to interpret management discussions and the annual report narrative
  • How to translate financial insights into client discussions – examining the link between strategic decisions, profitability, and valuation metrics
  • Framing questions for company meetings to explore strategy, budgeting, and value creation
  • Understanding the firm’s value creation levers, such as pricing power, competitive advantages, brand power, customer service, cost advantages, growth initiatives, cost of capital, reinvestment discipline, innovation record, distribution network, patents, licences, regulatory advantages, related party relationships etc
  • How management teams allocate capital, set targets, and measure value
  • Different models of measuring value creation including growth, EVA and ROIC versus WACC
  • Consequences of creating or not creating value for stakeholders
  • Examples of low and high value creation
  • What threats does the firm face in terms of its continued ability to create value?
  • Does the firm understand these risks and how will it address them?

 

Day Three

3.2 Understanding qualitative differences between different segments or industries

  • What are some of the key qualitative differences across different industries and segments?
  • Factors to focus on include creating value added, key success factors, capital intensity, product life cycle, customer preferences, risk factors, ESG and AI exposures, barriers to entry, competitive forces, growth outlook and cash flow generation
  • Is the segment homogenous or are there wide differences between firms within the same segment?
  • Are these factors expected to change in the future? What is driving any changes and what are the implications for credit quality?
  • Comparison of key differences between different sectors such as industrial, telecos, retail, tech, services, construction

Section 4: Complex group structures

4.1 Complex group structures

  • Defining complex group structures
  • Structural subordination and double leverage
  • The credit and rating impacts of partial ownership, a high level of NCI, and off-balance sheet entities
  • Proportional debt, earnings and cash flow of entities that are not wholly-owned
  • Who owns/controls the debt, assets, earnings, cash flows?
  • The impacts of different consolidation methods and how to make adjustments
  • The credit and rating impacts of different types of subordination
  • The credit and rating impacts of security packages
  • Case studies: reviews of complex group structures; assessing the rating notching implications of different group structures

Section 5: Debt structuring

5.1 Financial objectives and achieving an optimal capital structure

  • What are the firm’s financial objectives?
  • Are they realistic?
  • Defining an optimal capital structure
  • Reviewing the advantages and disadvantages of equity and debt
  • Defining enterprise value and equity value
  • Overview of WACC
  • The cost of debt and equity
  • Adjusting WACC for multi-national groups
  • Factoring in sovereign risk to the cost of debt and equity
  • Case studies: Calculating EV and equity values; practicing ke and WACC calculations

5.2 Debt capacity and debt tranches

  • What is the firm’s debt capacity?
  • Theoretical debt capacity versus market reality and constraints
  • Sources of debt service and repayment
  • Capital layering – using mezzanine and subordinated debt
  • Factoring in HC debt and double leverage
  • Who should be the borrower – HC, OpCo, or other?
  • Using off-balance vehicles and products
  • Assessing repayment capacity for amortising debt
  • How will new financing change the firm’s capital structure, WACC, eps, and credit ratings?
  • Case studies: Using a financial forecasting model to change the firm’s capital structure and assess the impacts on credit ratios. Undertaking scenario analysis to stress test the cash flow forecasts.

Section 6: Overview of analysing distressed firms

6.1 Early warning signs of distress

  • Overview of recent trends in downgrades, defaults, and distress rates
  • Background and definitions
  • Causes of distress and common early warning signs
  • Macro and sector signals; event risks
  • Analysing the financial statements and notes of distressed corporates
  • Income statement and operational signs
  • Cash flow signs - prospective and actual liquidity
  • Balance sheet signs
  • Case studies: spotting early warning signs and analysing distressed credits

6.2 What to do in the event of distress and potential restructuring solutions

  • Is it a liquidity problem, a leverage problem or a viability problem?
  • Speculative grade liquidity ratings
  • Acting on early warning signs if there is no covenant breach
  • Amendments and waivers
  • Advantages and disadvantages of calling an event of default
  • Options for restructuring and recovery
  • Does the firm have any residual equity value?
  • Could it have a positive equity value in the future?
  • Is it worth saving? Should the lenders advance additional funding?
  • Operational restructurings
  • Debt and equity restructurings
  • Case studies: modelling new borrowing facilities and debt restructuring solutions for distressed firms

Course summary and close

The Corporate Credit Risk Analysis course trainer has worked as a financial trainer for over ten years for many major financial institutions in Europe, Asia, the Middle East and Africa. She trains in financial and credit analysis, company valuation, financial modelling and distressed debt. The delegate profile ranges from graduates to board members. She has a degree in economics from the London School of Economics and stock exchange qualifications from London and New York.

Prior to her career in financial training, she spent seventeen years working as an investment banker in Europe and the US. She started her career as a graduate trainee at Kleinwort Benson and later became an Executive Director of CSFB and Lehman Brothers. She has principally worked in the credit markets and has experience of the US and European high grade and high yield markets, the European new issue markets, the Asian convertible bond markets and of corporate restructurings of distressed credits.

She specialised in the telecoms sector and was closely involved in the structuring, raising and/or trading of bank and public debt for telecoms companies in many countries, including Europe, South Africa, Asia and Latin America. She also has extensive experience of corporate finance transactions, including mergers, disposals, privatisations, IPOs and capital raisings. She has also worked as an expertise witness in financial lawsuits. She continues to advise SMEs on debt and equity raisings and M&A.

The course aims to:

  • teach delegates how adjust reported financial metrics and calculate key credit ratios from the three financial statements and notes
  • help delegates spot red flags that may indicate creative accounting
  • help delegates understand how complex group and capital structures impact a group’s credit profile and the implications for rating notching
  • help delegates (particularly the relationship managers) understand the importance of qualitative analysis - how clients create and sustain value-added and how clients determine their investment criteria
  • help delegates understand key qualitative differences across different sectors
  • help delegates understand how to advise corporate clients on more complex debt structures, in the context of creating an optimal capital structure
  • examine ways of assessing debt capacity
  • teach delegates how to analyse the statements of distressed firms and how to spot early warning signs

During the course, we reference and analyse a range of up-to-date case studies across different jurisdictions and sectors.

The course combines formal theoretical instruction with frequent use of exercises and case studies. These are based on theoretical and real situations and are designed to help delegates implement new practices and to learn from empirical experience. Delegates are expected to know how to use Excel. The course is practical and interactive, with delegates encouraged to ask questions. The techniques taught are intended to be of immediate practical use in the workplace. The lecturer will be available throughout the duration of the course to offer additional help if required. All delegates must bring their laptops to facilitate in-class studies and exercises.

This programme is designed for a range for finance professionals including risk managers and credit analysts who analyse and approve credit and counterparty exposures. It is also intended for relationship/origination managers to help them improve client inter-action by understanding the business and creating optimal capital structures. The course is suitable for professionals with 3+ years of experience. Typical seniority includes Associate, Associate Director, Vice President and Director.

As the economic outlook continues to remain difficult in Europe and the US, many corporates are facing a range of challenges, including higher interest rates and leverage, low economic growth, the transition to AI, digitalization and new environmental standards, as well as heightened geopolitical risks.  If commercial banks and other lending institutions fail to analyse correctly their credit risk exposures and update their forecasting models, they could be exposed to material credit losses. This course helps a wide range of credit professionals deal with the analytical, structuring, and forecasting challenges they face today.

We first review key financial metrics (earnings, finance expense, net debt, cashflow etc) and credit ratios that help determine a group’s current credit quality and debt capacity. We also analyse complex accounts, group structures and situations, using more advanced analytical and structuring techniques for assessing, limiting and offsetting credit risks.  We also examine debt structuring and how to help a borrower construct an optimal capital structure. We will also assess how to apply notching to layered capital structures.  We then analyse how clients create value and determine their investment criteria, with the aim of helping relationship managers establish a meaningful dialogue with clients about their future funding needs and credit outlook. Finally, we review how to analyse deteriorating and distressed credits – how to spot early warning signs of a weakening credit profile and how to restructure firms worth saving.

Principal topics covered during this course will include:

  • Recommended adjustments to reported financial metrics (particularly earnings, finance expense, cashflow and net debt) to help gauge a firm’s true credit profile
  • Assessing how quasi-debt and other on and off balance sheet liabilities impact the credit analysis
  • Key red flags of creative accounting
  • Adjusting and calculating key credit and performance ratios
  • Using historic performance analysis and client budgets to help make realistic forecasts
  • Qualitative risk analysis – understanding differences between sectors in terms of inter alia, creating value added, capital intensity, risk profile, ESG and AI exposures, cash flow generation and key success factors
  • Complex group structures and how they can improve or worsen credit exposures
  • Understanding the credit impact of different consolidation methods
  • Engaging with management–understanding how clients create and sustain value and how clients determine their investment criteria
  • Engaging with management -debt structuring-helping the client create an optimal capital structure, including debt layering, subject to minimizing WACC and to market constraints
  • Debt capacity considerations
  • Deteriorating credits, potential and actual NPLs: warning signs and strategies for restructuring the firm and minimizing loss
Number of places:

£ 2950.00

Discounts available:

  • 3+ places at 25% less
  • Select the number of course places and dates to automatically calculate the discount
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