Debt Finance

Course Overview:

This programme has been designed to provide a thorough review of debt financing principles and products. We will use real life case study examples to illustrate the financing techniques and products throughout the programme.

Participants will require laptops with MS Excel for the exercises and case studies.

The broad objectives of the programme are:

• To provide a complete review of debt financing theory and debt products
• To understand the link between corporate strategy and financing
• To identify funding requirements both short and long term
• To explain asset based financing
• To explain corporate asset securitisation
• To understand the role of debt financing in structured transactions
• To explain the real world use of debt financing techniques using current examples

Course Content:

Day One:

• Corporate Financial Structure
• Principles of debt finance
• Linking finance and corporate strategy
• Cost of capital and risk
• Theory of optimal capital structure
• External perspectives – equity analysts, rating agencies, shareholders, other stakeholders including regulators for certain industries
• Implications of dividend policy and share repurchases

Case study: linking financial strategy with corporate strategic objectives in financing situation

• Identifying the Funding Requirements
• Cashflow forecasting
• Short term liquidity funding
• Long term financing and project financing
• Matching the funding to the cash flows and assets
• Maintaining flexibility in the funding plan
• Currency implications and managing currency risks
• Basis risk
• Maturity risk and refinancing

Case study: identifying funding requirements and maturity for a corporate entity

• Debt Finance – senior debt issues
• Short term debt financing
• Senior long term bank debt and credit issues
• Lending bank perspective and credit risk assessment criteria
• Alphabet notes – Tla, TLb, TLc etc
• Raising bank debt – secured and unsecured debt
• Typical lending criteria and lending multiples
• Documentation and loan covenants
• Pricing bank debt
• Accessing capital markets
• Bond issues
• Convertibles
• Preference capital issues

Case study: structuring a senior debt issue in a refinancing situation

• Debt Finance – subordinated debt
• Definition of junior, mezzanine debt
• Types of mezzanine debt
• Contractual versus structural subordination
• OpCo/PropCo structures
• HoldCo notes
• PIK notes

Case study: structuring an MBO with various debt tranches

Day Two:

• Debt Finance – other debt issues
• Commercial paper issues
• Role of rating agencies and typical criteria used in a rating
• Using leasing structures for capital purchases
• Factoring and invoice discounting as short term financing alternatives
• Basic hedging tools for currency and interest rate risk management

Case study: evaluating a company placed on downgrade by the rating agencies

Asset Securitisation

• Structure of a typical securitisation deal
• Use of off-balance special purpose vehicles
• Asset backed receivables financing techniques
• Future flow receivables financing
• Credit enhancement techniques
• Using securitisation for long term financing – whole business securitisation
• The role of securitisation in acquisition financing
• Legal and accounting issues raised by asset backed securitisation

Case study: analysing the use of asset backed receivables financing as a short term financing alternative

Case study: analysing the use of whole business securitisation as a refinancing option for an acquisition

Project financing

• Project finance funding structures – mix of equity, secured debt and mezzanine debt
• Typical use of project financing – when to use rather than other financing methods
• Main contractual arrangements in a project financing – off take contracts, guarantees and concession agreements
• BOT, BOO, BOOT and other structures
• Sources of financing
• Credit enhancement and security
• Why projects fail

Case study: proposing a financing plan for a project

Debt Financing Summary

• Financing alternatives
• Why and when to use particular products or structures

Discounts available for multiple participants:

• 3-4 participants: 15% discount per participant
• 5-6 participants: 20% discount per participant
• 7-8 participants: 25% discount per participant
• 9 or more participants: 30% discount per participant