A three-day training course with real world case studies covering
- Overview of the bank loan and bond markets
- Credit ratings & the rating agencies
- Financial analysis, including calculating key credit ratios
- Qualitative and quantitative risk analysis for industry sectors and individual corporates
- Impact of corporate finance activity on credit quality
- Levered transactions and capital structures, including LBOs and roll-ups
- Documentation, including key financial and non-financial covenants
- Default predictors & dealing with problem credits
Day 1: The Capital Structure: Bank Loans, Bonds, and the Loan/Bond Markets
Objectives
- Review the credit “hierarchy” and respective claims of “slices” of the capital structure
- Profile the key characteristics of different financing instruments: secured debt, senior unsecured debt, subordinated debt, straight PIKs, hybrids, straight and convertible preferred, common equity, warrants
- Differentiate between the nature of bank loan covenants and structures (maintenance) vs. bonded debt covenants and structures (incurrence)
- Examine the nature of “the box” restricting, via covenants, flows of cash and assets around the firm, such as dividends, asset transfers, intercompany loans
- Highlight how these differing claims would be ordered in event of financial distress
- Examine key issues in the markets for loans and bonded debt
The module will examine:
- Debt Characteristics
- Security/Collateral, Covenants, and Indentures
- Coupons: fixed/floating, deductability
- Maturities and call features
- Structures: bullets, zeros, self-amortizing
· Syndicated Loans
· Low risk debt: treasuries, municipal bonds, international bonds
· Risky debt: corporate high grades vs. intermediates vs. high-yield
· Medium Term Notes
· ABS, securitization, and structured products
· Hybrids: convertibles, preferred stock
· Leveraged finance/syndicated loan market
· The bond markets: investment grade vs. high-yield
· Rule 144A: accelerated issuance and reduced disclosure
· Reg S Market and traditional private markets
- The Capital Structure Hierarchy
- Senior vs. Subordinated
- Secured vs. Unsecured
- Straight vs. Hybrid
- Debt vs. Preferred Equity vs. Common Equity
- Covenants
- The purpose: putting handcuffs on management
- Secured debt: “maintenance” covenants
- Unsecured debt: “incurrence” covenants
- “The Box”: restricted vs. unrestricted subsidiaries
- Protective covenants: limitations on additional debt, asset sales, cash distributions, and investments “outside the Box”
- Subtle covenants: liens tests, affiliates test, change-of-control covenants
Cases/Materials
- BlackRock 6.25% Senior Notes
- Progress Power (A) and (B)
- Debenhams PLC Syndicated Loan
- Debenhams PLC Syndicated Loan (PDF file)
- Leveraged Loans and High Yield Bonds (PPT file)
Day 2: Credit and Cashflow Analysis
Objectives
- Review types of business and financial risk, distinguishing between sector-level and enterprise-level risks
- Provide a thorough workout in financial ratio analysis of a firm’s current financial condition, linked to the Income Statement and the Balance Sheet
- Suggest frameworks for cashflow modeling in a credit context to assess future financial health
- Review the ratings process, and highlight differences between investment grade and sub-investment grade credits and investors
- Emphasize “actionability” and investment decision-making in credit analysis
The module will address risk in two dimensions – at the sector and enterprise levels – and then use both to assess a firm’s financial risk.
Analyzing Sector Risk
- Industry Analysis
- Drivers of a sector’s revenues, operating margins, and cashflow generation
- Demand Analysis: Revenue Drivers
- Economics
- Demographics, Lifestyle, Culture
- Government/Regulation
- Technology
- Revenue Forecasting
- Volume vs. Price and the impact of Inflation
- Economic Cyclicality
- The business cycle and its impact
- Recessions and credit risk
- Sector Cyclicality
- Variations in sector-wide performance
- Importance of growth rates, economies of scale, and capital intensity
- Operating Leverage: Importance of fixed costs vs. variable costs
- Pricing Power, Capacity, and the Cycle
- Downturn leads to exit, reduction of capacity, and firming prices
- Firming prices support margins, which draws in capital investment in capacity
- Excess capacity depresses pricing power, margins, and cashflows
- Sector returns to downturn
- Seasonality
- Concentration of sales in part of the year
- Need to build inventories in advance of selling season and accounts receivable build-up with sales season
- Negative cashflows for part of the year, followed by positive cashflows
- Inventory obsolescence risk
Analyzing Enterprise Risk
- The Cash Cycle
- Operational Risk
- Dependence on inputs sourced from difficult markets and in currencies differing from that of final sale
- Dependence on critical technologies
- Insufficient levels of R&D or marketing outlays
- Dependence on limited numbers of customers, narrow product ranges, or a few skilled managers
- Dependence on imprudent pricing policies; acquisition plans
- Financial Risk
- Dependence on excessive debt financing
- Mismatching durations of assets and liabilities: long-lived assets and short-term liabilities
- Excessive and undisciplined funding of customer purchases
- Imprudent financial planning or dividend policies
- Contingent and Latent Risk
- Contingent liabilities not captured in financial accounts
- Derivative contracts, off-balance sheet financing, unfunded contractual commitments and undertakings
- Latent Liabilities: environmental, health, product-liability
Enterprise Credit Assessment
- Assessing Existing Financial Condition
- Profitability Ratios
- Profit margins: Gross, Operating, Net
- Returns: ROA, ROIC, ROE
- Payout ratio
- Activity/Efficiency Ratios
- Sales/total assets, Sales/NWI
- Average collection period, inventory turnover, days payable
- Capital Expenditure/Sales
- Liquidity ratios
- Current ratio, Quick/acid test
- Market-Value Ratios
- Multiples: EV/Debt, EV/Senior Debt, EV/Junior Debt, P/E, EV/EBITDA, Price/Book
- Debt/EBITDA
- Leverage Ratios
- Debt/Equity, Debt/Total Capital, Debt/Assets
- Times-Interest-Earned and EBIT coverage
- EBITDA/Interest, EBITDA/Debt; Debt/EBITDA
- Cashflow Forecasting
- Cashflow peaks and valleys: comparing cashflows vs. operational needs and financial claims
- Translating the Credit Assessment into a Rating
Cases/Materials
- Progress Power (C)
- Leveraged Loans and High Yield Bonds (PPT file)
- S&P Medians, 2000-2003
- Bond Rating Systems
Day 3: Leveraged Finance and Shareholder Value
Objectives
- Illustrate how private equity managers generate returns through opportunistic entry, use of leverage and performance incentives, and timely exit
- Review how private equity transactions are structured and funded
- Demonstrate how the firm’s capital structure can be used, short of an outright LBO, to create shareholder value via tenders, buybacks, special dividends, and disposals/spinouts – with attendant credit impacts
- Build capacity to anticipate leveraged finance events and shareholder value initiatives before they happen
The module will consider:
- Characteristics of an LBO/MBO Candidate
- Stabilized, non-cyclical cashflows
- Opportunistic timing: favorable entry and exit valuations
- Strong management team in-place
- Potential for modest operational improvement
- Cost reduction, margin improvement, capex economies
- Underutilized balance sheet
- Non-core assets that can be monetized and unused debt capacity
- Forecasting in a Highly-Leveraged Situation
- Improved fundamental performance: cost controls, improved WC management, discipline in capital expenditure, management incentives
- Forecasting Debt Capacity vs. Minimizing Cost-of-Capital
- Transaction Structure
- Sources and Uses of Funds
- Debt Capacity vs. Credit Analysis/Ratings
- The Capital Structure: Senior Debt, Sub Debt, Mezzanine, Equity
- Equity levels
- Projected valuation, method, and timing of exit and projected IRR
- Sources of Financing
- Leveraged loan markets, structures
- Public high-yield bond markets, structures, and covenants
- Mezzanine securities and Equity sources
- The Impact of Potential Changes in Capital Structure on Public Valuations
- Debtholder vs. Equityholder Interests
- Optimal Capital Structure: Theory vs. Practice
o The Impact of Leverage on Equity Valuations
- Realizing Shareholder Value
- Dividend Policy: Regular and Special Dividends
- Shareholder Value Initiatives: Tenders/Buybacks, Disposals/Spin-outs
- Thinking Like an “Activist” Hedge Fund Investor
- Credit implications of shareholder value initiatives
Cases/Materials
- A Potential LBO and a Response: Marks and Spencer – Major Recap and Repurchase via Public Tender
- Disposal and Special Dividend: Hilton PLC
- All Options on the Table: KTG Corporation – Disposals, Special Dividend, Share Repurchase, Potential LBO
-
Andrew Regan
Andrew Regan, CFA served as an investment banker at Merrill Lynch and as a securities analyst at Donaldson, Lufkin, and Jenrette, where he counselled large institutional investors on their retail sector holdings.
In addition to these conventional sell-side duties, he was centrally engaged while at DLJ in a number of banking transactions involving retailers, including LBOs, IPOs, primary and secondary equity offerings, and private placements. He also assisted in the successful recapitalisation of a major real estate portfolio in the Silicon Valley area of California.
As an experienced training consultant, Mr Regan provides pedagogical support to organisations in the theory and practice of corporate finance and asset markets In his teaching work, he develops overall curricular strategies, prepares case and other instructional materials, delivers programs in the classroom, and offers follow-up evaluation.
He has delivered programs for clients throughout North America as well as Europe, Latin America, Asia, Africa, and the Middle East.
Andrew received his A.B. magna cum laude in Modern European History from Harvard College, his M.Sc., with Distinction, in West European Politics from the London School of Economics, and his M.B.A., with High Honors, from Harvard Business School, where he was a George F. Baker Scholar, Charles M. Williams Fellow, and Dean's Doctoral Award Winner. He holds the CFA Charter.
Interested in holding this course in-house? Please fill out your details and a member of our team will be in touch with more information.
16-19 Jul 2012 (New York, United States)
3-6 Dec 2012 (New York, United States)
This workshop is a banker’s survival guide that explores the dynamics of troubled companies from the perspective of bankers providing methodology for success that is punctuated with real-world examples. Topics include cash control, banking relationships, valuation in turnarounds, simulation technology, the “correct” banker’s style, and reorganization.
15-17 Oct 2012 (New York, United States)
This three-day program is designed for bankers, portfolio managers, and other professionals responsible for creating and maintaining optimal loan portfolios, identifying risk management opportunities and designing financial solutions for clients in the context of impending Basel III accords.
9-12 Jul 2012 (Miami, United States)
5-7 Nov 2012 (New York, United States)
This three-day course has been designed to provide participants with an overview of the private equity industry and the investment process throughout the different stages of a company’s growth. It explains the investment process, objectives, financial instruments and negotiation options from the point of view of both the investor as well as the business owner.
10-12 Sep 2012 (New York, United States)
Real Estate Modeling is an intensive hands-on course that provides attendees with knowledge regarding both fundamental and challenging modeling issues in the real estate industry. Delegates will learn how to model mixed development projects, residential projects with multiple portfolios, cash flow waterfalls, and simulation of risk associated with different lease rolls. Sessions of the course will include effective presentation of model outputs and comprehensive scenario analysis. In addition, the program will enable delegates to develop their skills in a variety of modeling issues associated with setting-up inputs, working with flexible time periods and incorporating alternative financing structures.
22-24 Aug 2012 (Miami, United States)
With the financial world currently undergoing significant changes, one of the most important challenges in banking is to reinforce the syndicated loan function and to refresh techniques given the evolution of the syndicated loan market. This course enables you to ensure that your staff – whether bankers, lawyers or investment professionals – have the tools to cope with the new environment.
24-27 Jul 2012 (Miami, United States)
13-17 Aug 2012 (New York, United States)
13-16 Aug 2012 (New York, United States)
17 Aug 2012 (New York, United States)
Formal lecture sessions, innovative deals and numerous examples of projects in the oil and gas, power and water desalination sectors are drawn from around the world and discussed
throughout the course. You will develop a framework for recognising, and analysing qualitative and quantitative project risks. Formal lecture sessions, innovative deals and
numerous examples of projects in the oil and gas, power and water desalination sectors are drawn from around the world and discussed throughout the course. You will develop a framework for recognizing, and analyzing qualitative and quantitative project risks.
26-28 Nov 2012 (New York, United States)
This course is designed to increase participants’ understanding of the increasingly complex and sophisticated process of liquidity risk measurement and management exploring both its issues and challenges. The 2007- 2009 crisis has only accelerated the spread of “new” best practices. National and international regulators, including FSA and CEBS are adding more complexity.
All delegates will receive comprehensive course documentation for use before and during the program. This will enable you to return to your organization with an extensive and valuable source of information for future reference.”
24-27 Sep 2012 (New York, United States)
The objective of this Workshop is to provide the assisting delegates with the necessary tools, techniques and criteria in order to further develop the skills competencies, and knowledge that are essential in managing client relationships, investment risk, and communicating portfolio management solutions
This course has now expired please email us to find out when the course will next be running.