Introduction to Corporate Credit Analysis

In addition to your class tuition and study materials, you will receive the following:


Case Study

• Credit rating derivation case study

Exercises

• Exercises provided

Other Extras

• Certificate of attendance

Level: Intermediate


Synopsis:
2008 witnessed unprecedented turmoil in the financial markets with a combination of uncertainty about the underlying robustness of the global economy and concern over exposure to sub-prime debt pushing leading indices downwards. In the short-term almost every commercial sector has seen downward pressure on its own credit status and the status of those with whom it trades. Learn how to read and interpret financial and non-financial data to appraise the true credit status of a business.


At the end of the course participants will be able to: Know the 4 Cs of credit rating analysis . Identify the factors considered by rating agencies in assessing the quality of management . Identify the sources of liquidity for a company . Compute and interpret key ratios in the credit analysis process . Explain the factors used by credit agencies such as S and P to rate a bond . Explain the use of ratios to identify corporate issuers that may be downgraded . Know the quantitative and qualitative aspects of credit risk analysis . Highlight special considerations in the analysis of high-yield bonds and asset backed securities .


Prerequisites:
Introduction to Financial Statements and Understanding Fixed Income - useful prerequisite knowledge, but not essential


Suitable For:
Employees involved in the research, analysing and selling of corporate bonds. It will be relevant for anyone who needs an understanding of how credit status is derived and how it is influenced by corporate accounting policies.


Reasons for corporate failure

• What does a credit rating tell us?

Financial statements - a recap

• The statement of financial position/balance sheet and the income statement
• The statement of cash flows
• Understanding the effect of accounting policies
• Analysis of non-financial information - Contents of the annual report

Analysing the financial statements

• Accounting principles
• Review of accounting policies
• Commercial substance vs. legal form
• Off-statement of financial position finance
• Taking the analysts perspective

Ratio analysis

• Measuring short-term solvency
• Measuring leverage and its implications for earnings - Implications of capital structure
• Coverage tests
• Profitability ratios - Operating and financial cost structures
• Investor ratios
• Trend analysis

The 4 Cs of credit analysis

• Character,Capacity,Collateral and Covenants

Non-financial analysis

• Macro, industry and company factors
• Analytical tools and what they tell us

Sources of liquidity

• Why liquidity is important
• Working capital and cash flow
• Securitisation
• Guarantees

Cash flow analysis

• Measuring and interpreting financial flexibility
• Sources of liquidity
• Producing a statement of cash flows
• Analysis of cash flow types
• Computing the free cash flow of a business
• Evaluating repayment ability on a cash flow basis

Special considerations

• High yield bonds
• Asset-backed securities - Credit quality of collateral