Description
SUITABLE FOR:
General Managers, Finance Directors, Financial Controllers, Bankers, Financial Managers, Treasury Managers, Treasurers, Finance Managers, Financial Accountants, Auditors, Credit Managers, Credit Analysts, Accounts supervisors, Superintendents, Finance Professionals, Relationship Management and Debt Origination.
OBJECTIVES:
By the end of the course, delegates will:
- Have learned a structural and systematic approach to evaluate the credit worthiness of a company and the relative attractiveness of the risk-return profile
- Have used appropriate market indicators where available to understand refinancing risk and the market view on a credit
- Have reviewed debt structures to assess to what extent they meet the commercial needs of the borrowers and protect the lender’s interest.
SUMMARY:
The topics covered include:
ANALYTIC OVERVIEW
- Purpose: identify the borrower and use of funds
- Payback: link credit assessment to primary and secondary sources of repayment
- Risks to repayment: the need for sector and company analysis to evaluate debt servicing ability
- Structure: assess the ability of the debt to meet the commercial needs of a company while protecting lenders’ interest
- Exercise
MARKET INDICATORS OF CREDIT RISK
How various market outlook and indicators can be used as warning signals of credit migration or increased refinancing risk:
- Credit ratings
- Debt market indicators: bond spreads vs. rating curves and CDS pricing
- Equity signals: share price movements and key multiples.
RISKS TO REPAYMENT
Macro considerations
Identify the macroeconomic and sector drivers which significantly influence company specific cash flow profiles:
- Operating environment
- Influence of social issues
- Government intervention and regulation
- Political and sovereign risk.
Liquidity Management
MANAGEMENT AND SHAREHOLDERS
Review the strengths and weaknesses of management and the influence of company ownership:
- Management performance
- Corporate aims and goals and their effect on the company’s future
- Shareholder structure, support and influence.
Case study
BUSINESS RISK
Assess a company’s business strategy in order to understand the asset investment needs and commercial viability of a company and their effect on the quality and stability of cash flows.
Business strategy
- A company’s markets, products, services and competitive position
- Corporate actions underpinning its growth strategy.
- Forecast operating performance and asset investment requirements.
Case study
FINANCIAL RISK
Evaluate the appropriateness of a company’s funding structure given the operating environment, management and shareholder goals and overall business risk and an evaluation of its debt service ability and refinance risk.
Financial strategy
Corporate treasury objectives:
- Risk appetite of capital providers
- External rating maintenance
- Tenor matching, funding and liquidity and refinancing needs
- Alternative sources of funding: trade, bank debt, capital markets, structured finance, equity etc.
Case study
Liquidity
-
- Financial flexibility: measuring liquidity or payment readiness
- Funding instruments used by companies that can increase the refinancing risk and overall financial risk
- Exercise
