High Yield and Leveraged Finance Analysis and Investing

Day One

Foundations

• High yield and leveraged finance market background – size, history, participants, historic returns and default rates, composition and credit rating agencies
• Instruments and their key terms and conditions – high yield bonds and leveraged loans, bank debt (revolvers, working capital facilities, bridge finance and capital expenditure facilities) and PIKs; credit default swaps; corporate structure and capital structure; covenants; security packages and enforcement rights; guarantors; and call scehdules
• Leveraged buyouts (LBOs) – overview of deal structuring
• Cash flow template to provide key insights on debt service capacity

Example: Europcar (car rental company)

Workshop: Evaluating key terms and conditions of New Look Retail Group Limited’s (UK clothing retailer) bonds; preparing and interpreting cash flow template for New Look

High Yield and Leveraged Finance Analysis and Investing

• Delineation of credit analysis process – business assessment, financial assessment, instrument assessment
• Business assessment – products, competition, customers, company
• Financial assessment – financial statement analysis, forward looking financial modelling, key credit metrics, covenant compliance testing, liquidity analysis and debt service capacity.
• Instrument assessment – covenant, seniority, security and guarantor protection
• Stress testing – what does it take to “break” the company? What are the key ways in which companies get into distress? What are recovery prospects?
• Valuation – identifying comparables for relative valuation; absolute valuation

Example: Ono (Spanish cable operator)

Workshop: Are New Look’s senior unsecured bonds an attractive investment?

Day Two

Case Studies

Case Study 1 – Identifying and analysing companies in structural decline
Example: Norske Skogindustrier ASA (Norwegian newsprint and magazine paper producer)

Case Study 2 – The hallmarks of a successful LBO
Example: TDC (Danish telecoms operator)

Case Study 3 – The hallmarks of an unsuccessful LBO
Example: EMI (Global music publishing and recording company)

Workshop: Can Nokia (mobile phone device and telecoms equipment manufacturer) survive and are its bonds an attractive investment?

Case Study 4 – Identifying, analysing and investing in a successful turnaround situation
Example: Thomas Cook Plc (tour operator)

Case Study 5 – Analysing and investing in project finance like high yield investment opportunities
Example: Fortescue Metals Group (start up Australian iron ore producer)

Case Study 6 – Identifying, analysing and shorting fallen angels in the making
Example: DSG International Plc (consumer electronics retailer)

Workshop: Can Arcelor Mittal (steel producer) survive and are its bonds an attractive investment?