The Debt Finance Training Course

This course can also be presented in-house via live webinar.

The Debt Finance Training Course Objectives:

The broad objectives of the programme are:

  • To provide a complete review of debt financing theory and debt products
  • To identify funding requirements both short and long term
  • To explain asset based financing
  • To explain the real world use of debt financing techniques using current examples
  • To explain yield curves, debt pricing in the primary and secondary markets
  • To explain measures for risk management in debt instruments including interest rate and credit spread sensitivity (duration and convexity)
  • To demonstrate how interest rate and foreign exchange risk can be managed using derivatives
  • To explain the world of securitisation post 2009

The Debt Finance Training Course Content:

Day One of the Debt Finance Training Course

The objective of Day-1 is to ensure that participants understand why and how companies borrow money, the effect that borrowing money has on the financial statement of the company and the role that the bank plays in the process. It also covers sources of finance, products used and investors together with their objectives and expectations.

This module introduces participants to customer funding needs, why they arise and their nature.

  • Principles of debt finance
    • Linking finance and corporate strategy
    • Cost of capital and risk
    • Theory of optimal capital structure
  • Start-up capital
    • How to calculate the amount
    • Where to get it
  • Working capital
    • Banks
    • Peer to peer lenders
  • Debt versus equity
    • Advantages and disadvantages
    • Relative costs
  • Cash flow forecasting
  • Long and short term financing

Case study: Writing the first year’s business plan and cash flow statement.

Module 2 explores the instruments that are available to raise finance and will provide recent examples of products. The following products will be explained:

  • Fixed and Floating Rate Bonds
    • How to choose between fixed and floating rate
    • The bond and swap concept
    • Raising finance in a third currency and swapping into a desired currency
  • Convertible Bonds
    • Types of convertible
      • Conventional
      • Mandatory
    • Advantages for issuers and investors
    • Pricing a convertible bond
    • How convertible bonds exist after issue
    • Asset swaps
    • The call component
  • Commercial Paper
    • Commercial paper programmes
    • The dealer panel
    • Pricing, investing and liquidity
  • Project Finance
    • An overview of project financing.
    • A typical project finance structure
    • The parties and their objectives
    • The key issues for lenders
  • Bank Loans
    • The typical bank loan
    • Security and covenants
    • Maturity and spreads
  • Syndicated Loans
    • What are syndicated loans?
    • How are they structured and sold?
    • Who invests in syndicated loans?
    • The advantages of syndication versus self-negotiated loans
  • Private Placements
    • What are private placements?
    • Who invests in private placements and why?
    • How are private placements structured and sold?
  • The Repo Market
    • The government bond repo market
    • The corporate bond repo market
    • Classic repo
    • Central clearing, collateral, haircuts and mark to market
    • Why use repo and reverse repo?

Case study: Issuing a corporate bond

  • In this exercise delegates will undertake the roles of the participants in a corporate bond syndication and will:
    • Liaise with investors to obtain orders
    • Place orders into the selling syndicate
    • Create and manage the “book of interest”
    • Calculate the allocation and pricing for book building
    • Allocate the bonds and calculate the cost of funds for the issuer

Day Two of the Debt Finance Training Course:

The objective of Day-2 is to ensure that participants understand yield curves and how to interpret them. Once participants are familiar with yield curves they will learn how to manage currency and interest rate risk. Finally, participants will learn about securitised products.

  • Yield curve construction
    • The government bench mark curve
    • The forward curve and the likely path of rates in future
  • The likely cost of money for the borrower for new bond issues
  • How credit spreads are set
    • Loss given default
    • Expected default probability
    • Implied default probability
  • How to decide whether to issue a fixed coupon bond or an FRN
    • Your view of expected future interest rates compared to the forward curve
  • Pricing a bond in the secondary market
    • Which interest rate to use
    • Which credit spread to use
    • Building a discount factor
    • Cash flow mapping and discounting future cash flows

Case study: Understanding yield curves, forward rates and credit spreads and pricing a corporate bond

  • Government bond risk management
  • Macaulay and Modified duration
    • Definition and understanding
    • Applications
    • DV01 the key to trading, hedging and risk management
  • Maturity ladders and portfolio management
  • How banks and portfolio managers run their portfolios
  • Convexity
    • Calculating
    • Applications
  • The complete view of risk
    • Maturity ladders
    • Duration and convexity
    • DV01

Exercise – Budgeting interest rate risk in a company

  • Basic hedging tools for currency and interest rate risk management
    • Interest rate swaps
    • 90 day LIBOR Futures
    • Swaptions
    • FX Outright Forwards
    • FX Options
    • Currency Swaps
  • Types of exposure
    • Interest rate risk
    • Currency risk
      • Transaction
      • Translation
      • Economic
    • Examples of how to hedge each type of risk using derivatives

Case study: hedging interest rate and FX transaction exposure using derivatives

Asset Securitisation

  • Structure of a typical securitisation deal
    • The Asset pool
    • The Special purpose vehicle
    • The Capital Structure
  • Types of securitisation
    • Residential mortgage backed securities
    • Auto loans
    • Credit card receivables
    • Collateralised loan obligations
    • Covered bonds
  • Structure properties
    • Weighted average ratings factors (WARF)
    • Historical default probabilities and receivable arears
    • Credit enhancements and subordination pre and post crisis
    • Portfolio returns
  • Funded and synthetic structures
    • Advantages and disadvantages

Case study: Building a collateralised loan obligation.

Participants will be provided with a pool of available assets and will be asked to build a CLO, calculate the WARF, build the capital structure, price the notes and calculate the expected return on first loss piece

Background of the Trainer:

With over 30 years’ experience in both the training field and in finance, the trainer is regarded as a leading edge trainer in numerous areas. He specializes in Derivatives, Capital Markets, Risk Management, Structured Finance and Treasury Products. He has delivered programs in every major financial center to both buy-side and sell-side firms at all levels.

For more than three decades, the trainer has held various positions in several commercial and international investment banks. Key roles have included positions as Head of Institutional & Corporate Sales as well as being the Head of the Private Client Investment Desk.

He is The Chief Examiner for The Chartered Institute for Securities and Investments Bond and Fixed Income Examination.

The Debt Finance Training Course Summary:

This debt finance training course has been designed to provide a thorough review of debt financing principles, markets and products. We will use real life case study examples to illustrate the financing techniques and products throughout the programme.

Participants will require laptops with MS Excel for the exercises and case studies.

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5-6 participants – 20% discount,7-8 participants – 25% discount,Over 9 participants – 30% discount