Course Overview

A three-day workshop for experienced credit risk managers and fixed income investors. The training will provide a systematic approach to identifying early warning signals which can be applied to companies in different sectors.

Course Objectives

The aim of this three-day corporate credit class is to hone the analytic skills needed to detect and respond to problems facing a corporate client and propose effective solutions that both meet the commercial needs of the business and protect the lender’s interests.

Specifically, participants will be equipped to:
• Identify warning signals on a timely basis to enable them to interface effectively with a client, obtaining information and opening / furthering a dialogue to discuss management’s plans for dealing with the issues at hand.
• Review a company’s covenant package and funding structure, in context of it operating performance, to determine the extent to which they provide effective triggers and protect the lender’s interests.
• Consider the practicality of solutions designed to stabilise the business and assess alternative options to enable the bank to take effective action as early as possible in order to minimise future problems / losses.

Course Content

Day 1

Problem Recognition
Credit Culture
Credit Process
Delegation of Authority
Team Effort
Accountability vs Blame
Real life examples

Early Warning Signals
Financials
Industry Trends
Promoter Losing Focus
Discusses Scam deals
Bank Guarantee Structures etc
Key people leaving

Senior Management to take views on Industry wide recession and Sector related issues. (Early bird catches the worm.)

Case Study: Groups to study credit packs and arrive at an understanding of the early warning signals from both published data and from minutes of meeting and other call memos in the organizations files. The disadvantage of computer files.

Common Themes
Excessive Growth
Over-concentration
Volatile earnings
Asset and Liability mismatches
Unstable Funding Sources

Signs of Distress
Financial
Non-Financial
Market/Industry indicators

Events of Default
Potential Event
Covenant Breach
Mark to Market
Stress Testing
Portfolio Analysis

Reaction to Default
Facing up to the situation
Syndicated Loan
Multi Banked Loan
Multi layered relationship for eg Equity, Underwriting and Lending
Knee jerk or going by the book results in greater damage

Day 2

Different approaches
Good Bank - Bad Bank
Credit takes over
Marketing continues to manage

Team discussion to arrive at best approach in these scenarios. Interactive session based on the participants experience and knowledge of how their company deals with problem loans

Preparation for Legal Battle
Legal Independent Audit
Mock Trial - worth the cost
Prepare before war
Maintain one window of communication only
Choice of Lawyers - In-house Legal hurdles

Cashflow Modelling
Creating a Loan Repayment Model
Effect of Restructuring using the Excel
Stress Testing the Financial Model
Sensitivity Analysis
Valuation of Distressed Asset
Making provisions

Arriving at the cash flow model to arrive at the debt restructuring of a property portfolio given the pressures on rent renewals, increased construction costs and decreasing sales.

Shaking the Tree
Pro active approach
Understanding the problem
Agreeing on Strategy
Finding a Solution
Feedback and monitoring results

Case Study Example: Restructuring of $180 million debt provided by 6 banks to a agriculture based company which had presence from Latin America to Asia.

Day 3

Funding Structure
Covenants
Effect on operating performance
Effective triggers - MATs
Win-win situation protecting Lenders interests

Immediate Steps
Stabilise business
Working capital needs
Protecting the jobs and the value
Effective actions the banks should take
Focus on going forward
To minimise losses and future problems

Case Study: Actual steps taken to recapitalize the Company and restructuring the debt was just part of the efforts to restructure the operations and monitor the performance of the Company. Finally, the convertibles used t restructure the Company was used to convert the loan into shares which were sold in the market to recover the bad loan in full.

Securitised Transactions
REITS, Secured Bonds etc
What happens in a default
Who leads, nightmare or windfall for professionals?
Practical difficulties in co-ordinating a response
Secondary market trading of debt securities

Case Study: Actual steps taken to restructure the Secured Bonds whose primary recourse was the securitised receivables of number of buildings with long-term rental income. Restructuring the debt was the significant part of the effort in a situation with negative equity and no major bank or shareholder who had a vested interest in the project. Use of mezzanine, convertibles etc used to restructure the deal.

PDF of course outline- Please note that tailoring is possible


IF YOU HAVE ANY QUESTIONS ABOUT THIS SEMINAR PLEASE WRITE TO US AT post@redcliffetraining.co.uk

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