Commercial Loan Portfolio Management
Short course
In London
Description
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Type
Short course
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Location
London
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Duration
3 Days
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Start date
Different dates available
A comprehensive toolkit for the effective management of a commercial loan portfolio, covering best practice credit analysis, loan structuring and pricing, risk management and distressed workouts. Focused on practical application, the course covers 6 workshops and 18 case studies taken from a variety of UK, European and US companies.
Facilities
Location
Start date
Start date
About this course
Day 1 focuses on credit analysis, financial modelling and stress testing from a commercial lender’s perspective, together with credit risk mitigation through security packages, covenants and guarantees.
Day 2 focuses on distressed loan workouts, from early warning signals, entry into distress and lender preparation for distress, through short term and long term restructuring options, culminating in exits of post reorganization debt and equity. The economics of non performing loan sales are also evaluated.
Day 3 focuses on portfolio issues in commercial lending, namely an evaluation of returns in an economic value added framework, risk limit setting, other risk management tools (including securitisation) and governance.
Officials responsible for handling problem loans at the bank
Credit analysts and Credit risk managers
Portfolio managers
Head of problem loan restructuring
Head of loan desk
Accountants
Head of distressed debt trading
Central bankers and regulators
A basic knowledge of finance and credit.
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The average rating is higher than 3.7
More than 50 reviews in the last 12 months
This centre has featured on Emagister for 15 years
Subjects
- Credit
- IT risk
- Risk
- Financial
- Financial Training
- Loans
- Testing
- Financial Modelling
- Cash Flow
- Options
- Economics
- Risk Management
- Retail
- Equity
- Portfolio Management
- Sales Training
- Sales
- Quality Training
- Credit Risk Management
- Industry
- Global
- Quality
- IFRS
- Transactions
- Accounts
- Best Practice
- Commercial Loan
- Financial Statement
- Cash flow analysis
- Stress Testing
- Securitisation
- Risk Governance
- Syndication
- Credit Analysis
Teachers and trainers (1)
Rupesh Tailor
Teacher
Rupesh Tailor is a banking sector specialist with over thirteen years’ experience, working for sell-side and buy-side financial institutions including Goldman Sachs, Barclays Capital, Merrill Lynch, Auriga Investors and Morgan Stanley. He specialized in the European bank sector as well as the analysis of high yield and leveraged finance investments. His responsibilities included analysis, trading and portfolio management of credit and equity products. Rupesh developed a proprietary method for predicting bank failure, which has been used to accurately predict banking stress.
Course programme
Commercial Loans – Products, Credit Analysis And Structuring
Introduction
- Course overview
- Term loans
- Revolving credit facilities
- PIK and PIK toggle facilities
- Accounts receivable / borrowing base facilities
- Components of credit analysis – business, financial and loan assessments
- Business assessment – macroeconomic sensitivity; industry structure and risks; firm specific risks; management and ownership; SWOT analysis
- Financial assessment – financial statement analysis; cash flow analysis; key credit metrics
- Loan assessment – corporate structure; security package; guarantees; capital structure; covenants; loan agreement documentation; intercreditor agreement
Workshop 1: Credit analysis – Seadrill Limited (offshore deepwater rig company)
Financial Modelling
- Financial modelling for commercial bankers – best practice model layout, use of Excel techniques (labelling, vlookups, sumifs, index matching, sensitivity analysis) and desired outputs
- Testing covenant compliance
Stress Testing
- What does it take to “break” the company?
- Stress testing – calibration and implementation; stressed credit metrics; stressed covenant compliance; stressed liquidity position
- Altman Z Score
- Deriving probability of default from expected default frequency in Merton/Merton variation models
Case Study 5: Financial modelling and stress testing of cyclical businesses – Freeport McMoRan Inc (US metals, mining and energy group)
Workshop 2: Financial modelling and stress testing Seadrill Limited (offshore deepwater rig company)
Credit Risk Mitigation In Commercial Loans
- Fixed and floating charges
- Security packages – share collateral, deposits, property/land, inventory, accounts receivable, intellectual property
- Collateral risks – perfecting security; substantive consolidation; voidable preferences; bankruptcy stays; security release clauses
- Realizing security – triggers for enforcement; claims priority from enforcement proceeds
Day Two
Commercial Loan Distress and Workouts
Entry Into Distress
- Causes of distress
- Distress early warning signals
- Forensic accounting of dubious quality cash flow
- Loan classification methodology and changes under IFRS 9 internationally and FASB’s Current Expected Credit Loss (CECL) standard
- Internal reporting and monitoring of problem credits
Commercial Lender Preparation For Distress
- Can the loan remain performing or will restructuring or liquidation be required?
- Use of financial modelling and stress testing
- Strategic options – assessing scope for asset sales; secured financing; sale and leaseback transactions; and equity raising
- Lender risks with pre bankruptcy credit risk mitigation measures
Loan Workouts
Short Term Options – Reduce Free Cash Flow Burn
- Overdraft facility / borrowing base facility / accounts receivable facility
- Trust and warehouse receipt and other inventory secured facilities
- Business restructuring
- Asset sale options
Long Term Restructuring Options
- Approaches – (1) Out of court restructurings – voluntary and coercive exchanges, holdout problems; (2) In court restructurings – pre packaged or pre negotiated vs post petition, process
- Key elements of bankruptcy law – UK, US, Europe
- How to estimate the sustainable level of debt for the business around which the restructuring will be designed
- Business valuation – EBITDA multiple and DCF approaches
- Estimating recovery value
- Complexities arising in group structures spanning several legal jurisdictions
- Tactics in loan workouts
Selling Non Performing Loans
- Evaluation of whether to sell NPLs or attempt restructuring
- Buyer base for NPLs and their investment considerations
- Managing the NPL sale process
Exiting Post Reorganization Debt And Equity
- Bank to bond transactions
- Selling post reorganization equity – IPOs, trade sales, private equity sales
Workshop 4: Developing restructuring plans for Isolux Corsan (energy, construction and infrastructure company)
Day Three
Managing A Commercial Loan Portfolio
Commercial Loan Economics – Grading, Provisioning, Pricing And Regulatory Capital
- Developing an internal rating scale
- Modelling Basel 3 Advanced and Foundation Internal Ratings Based (IRB) credit parameters – probability of default (PD), loss given default (PD), exposure at default (EAD)
- Risk weighted asset exposure and regulatory capital requirements
- Loan loss provisioning under IFRS 9 and FASB CECL as compared to prior accounting standards
- Return on Risk Adjusted Capital (RORAC) based loan pricing
- Economic Value Added (EVA) based loan pricing
- Borrower hedges for interest rate and FX risk on loans – XVA implications and incorporation in pricing
- Credit Portfolio Management
- Concentration measurements – industry; single borrower/borrower group; country/region/location; foreign currency; collateral; maturity; funding; correlation
- Credit limit setting – industry; single borrower/borrower group; country/region
- Credit limit setting for counterparty exposure on OTC derivatives and securities financing transactions – use of potential future exposure modelling
- Diversification measurement
- Syndication of loans
- Securitisation
- Use of credit derivatives
Securitisation
- Mechanics of securitisation
- SME securitisations – structuring considerations and economics
- NPL securitisations – structuring considerations and economics
Risk Governance
- Credit risk management objectives, credit risk culture and appetite
- Credit risk management organization
- Credit risk management process
Commercial Loan Portfolio Management