Credit Analysis and Financial Modeling

Introduction

Through case study analysis you will learn to analyze thoroughly different types of corporates to allow you to make sound business decisions. This training program will provide you with the full range of credit diagnostic skills you need to assess credit risk inherent in potential banking clients in the GCC region. The focus of the course is for you to develop holistic credit analysis skills to examine the full range of internal quantitative as well as an external business environmental, qualitative, strategic, and management risks that can impact upon corporate cash flows of clients and therefore a client’s ability to honor its debt repayments. Through cash flow forecasting and financial modeling, you will learn how to anticipate future risk crystallization and its impact on future client cash flows. The quantitative analysis developed during the course will focus on interpreting trends in financial information. You will connect the links between different financial drivers as well as assess new financial ratios to interpret financial risks. Finally, by attending the course, you will develop an applied understanding of using cash flow sensitivity to optimally structure a debt facility which will allow your client companies to operate effectively and honor their debt repayments while protecting the bank from the downside effects of credit risk crystallization.

Objectives

The aim of this course is to teach delegates how to analyze corporate credit risk and how to assess an appropriate return. This course does not extend to the analysis of banks, insurance companies, or structured vehicles. After completing attending this program participants will be able to:- 

• Understand the core principles of holistic credit risk analysis bankers use to assess a corporate client’s credit risk rating
• Use financial statements to undertake the credit risk of corporate clients
• Identify working capital needs through the cash conversion cycle and understand how it affects liquidity
• Identify acceptable levels of key ratios used for holistic quantitative and credit risk analysis, specifically those used to measure a company’s liquidity, capitalization, debt service, profitability, and overall performance
• Identify Early Warning Signals (EWSs) arising from ratio analysis
• Conduct a qualitative analysis as part of the holistic credit analysis process, including strategic analysis, management risk analysis, external risk analysis, and competitive pressures in a company’s market
• Apply cash flow statement analysis and the debt service coverage ratio as central parts of credit risk analysis
• Use sensitivity analysis and financial modeling in Excel to create cash flow forecasts to measure a client’s future performance and the principal risks that might affect their ability to honor their debt service
• Structure of the optimum debt repayment schedule for a company as well as the key terms and conditions used in debt structuring
• Explore key commercial issues to be included in the loan documentation for corporate clients

Training Methodology

This is an interactive course. There will be open question and answer sessions, regular group exercises and activities, videos, case studies, and presentations on best practices. Participants will have the opportunity to share with the facilitator and other participants on what works well and not so well for them, as well as work on issues from their own organizations. The online course is conducted online using MS-Teams/ClickMeeting.

Who Should Attend?

Delegates who have at least three years’ banking experience, ranging between an intermediate and senior level of their respective professional banking careers, will benefit from attending the course. This course is also aimed at professionals with a minimum of three years’ applied experience in corporate credit analysis. Financial professionals within large corporates, who work regularly with banks and wish to learn how banks assess their credit risk rating will benefit from attending the course. The course will also help you negotiate debt facilities with banks. Good working knowledge of Excel and cash flow forecasting is also beneficial but not essential.

• Bank credit officers
• Investment bankers
• Management consultants
• Bond credit analysts
• Fixed income/credit traders
• Fixed income/credit salespeople
• Fund managers
• Treasurers
• Compliance officers
• Financial decision-makers in corporations

Course Outline

During the five day course, we will cover:

• The bank loan and bond markets
• Qualitative risk analysis: sovereign, industry & company specific
• Quantitative risk analysis including key credit ratios
• Credit ratings & the rating agencies
• Impact of corporate finance activity on credit quality
• Financial modelling in Excel, including LBOs
• How to apply sensitivity analysis
• Documentation: high grade & high yield prospectuses, loan document
• Default predictors & recovery rates
• Structural & contractual subordination