Corporate Credit Analysis

Course details

The goal of the Corporate Credit Analysis training course is to provide an appreciation of the tools used by analysts working in Corporate Finance and Mergers & Acquisitions to assess valuation, capital structure and shareholder value creation on an acquisition.

Course Content

• Introduction and programme goals
• The balance sheet
• The Accounting Equation (Net Assets vs. Shareholders Funds)
• Capital Employed = Capital Provided
• Return on Capital Employed vs. Return on Equity
• Cost of Debt, Cost of Equity and WACC
• Fair Value vs. Amortised Cost for Debt and Equity Values
• Determining an appropriate measure of net debt
• Cash flow forecasting, WACC and fundamental valuation
• Market valuation, covenants and debt capacity
• Fixed Charge Cover (Debt / Tangible Fixed Assets)
• Debt Service (Debt Service Coverage Ratio)
• Interest coverage (inc./ ex. operating lease commitments)
• Net debt / EBITDA
• Free cash-flow to the firm
• (gearing / interest cover are basic but a quick refresher will be included)
• Implications of a covenant breach –
• What to do
• What can you do
• When to waive / when to act
• Syndications / voting rights
• Validation of client forecasting and modelling.
• Key input assumptions and sensitivities in a model
• Revenue growth (price vs. volume assumptions)
• Margins: variable vs. fixed costs
• Operating cost increases (inflation-linked)
• Working Capital Growth: Inventory, receivable & payable days (and turnover multiples) and the cash conversion cycle
• Fixed Assets: Depreciation and replacement
• Taxation: Effective rates, capital allowances and deferred tax
• Terminal growth rate beyond the forecast period
• Assessing management and corporate structure – their strengths and weaknesses + corporate governance:
• Role of the Chairman, CEO, CFO and COO
• Non-executive vs. Executive Directors
• Supervisory vs. executive boards
• Governance disclosures in PLC accounts
• Organisational design
• Summary

Learning Outcomes

• Delegates will learn the fundamental principles behind financial reporting, and how to read and interpret annual reports and accounts.
• They will learn how to analyze financial information to determine financial performance, position and cash flow generation.
• They will learn how to calculate and interpret key financial ratios and measures of profitability, liquidity, solvency and credit risk.
• They will learn how to estimate company valuation, and the relationship between equity and enterprise value.
• Finally, they will learn how to build financial forecasts and identify key value and cash flow drivers.

Who Should Attend

The programme is targeted at:

• Buy side and Sell side research
• Credit Analysts
• Risk Managers

Optional Pre course elearning

There is optional elearning available. The module will cover the following topics;

• Credit Analysis – An Introduction
• Financial Analysis – An Introduction
• Principles of Credit Extension