Advanced Corporate Credit - Warning Signals
COURSE HIGHLIGHTS
Real Case Studies

Real company case studies to test your newly learnt skills

CPD Recognized

This course is Continuous Professional Development (CPD) recognized

Highly Interactive

Highly interactive with small group size and industry expert trainers


Advanced Corporate Credit - Warning Signals

Duration: 3 Days ･ CPD Points: 24 CPD Points ･ Level: Advanced

Spot early signs of credit deterioration in companies by analyzing various aspects of business health and applying lessons from past credit crises, using interactive case studies and exercises for practical learning.

Read more about the course.

Delivery Method Classroom
Location London
Dates 4-6 Nov 24
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Course Details

The aim of this course is to identify the early warning signals of credit deterioration. The course covers all aspects of a company’s situation. From product to market, to financial condition; this is to identify the patterns commonly seen within corporate deterioration. The course will draw upon lessons learned from previous credit crises to determine sustainable levels of debt, the strengths and weaknesses of deal structures, and how best to respond to problems facing a corporate client. The key element of the program is to identify problems when the economy is strong. What are the characteristics of a company which will run into trouble during the next recession? A good analyst can identify the warning signals during the time of economic growth.

Key Learning Outcomes:

  • Uncover the early warning signs or red flags during the life span of the loan or bond: financial and non-financial and market indicators
  • Identify companies most susceptible to credit deterioration and the factors that will impact the likelihood of default or the need for distressed exchange of debt
  • Evaluate the options available to lenders or investors when signs of credit deterioration become apparent
  • Determine the strengths and weaknesses of an existing loan structure to improve loan structures going forward
  • Set the minimum level of transparency acceptable to make a responsible credit decision
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Course Content

Analytic Overview

Apply a structured approach to evaluate the credit standing of a company, specifically looking for signals of weakness or potential danger.

Causes of distress

  • Macroeconomic forces and concerns surrounding current issues
  • Sector issues: Sectors most vulnerable to cyclicality, macroeconomic sensitivities and structural changes
  • Company-specific factors: Why certain companies are more vulnerable than others to credit deterioration
  • Application: Debrief of pre-read; participants come prepared with own examples of failed companies

Early warning signals

  • Symptoms of a deteriorating credit: Non-financial indicators, financial indicators, and market indicators
  • Credit ratings: Credit migration
  • Market pricing during turbulent times: Bond, CDS and share prices

Structured analytic approach

  • Application of the four-step approach to credit to expose key early warning signals: Purpose, payback, risks and structure
  • Risks to repayment: Current market conditions and their impact on risk
  • Application: Identify possible purposes and sources of repayment

Themes of Distress

This section aims to identify the themes of distress. The action(s) taken by the companies and/or lenders are explored through discussion and many real-life examples of actual or potential distress. The focus is on concluding upon lessons learned to avoid future problems.

External macroeconomic and sector indicators

  • Economic cyclicality in various markets and the potential disastrous effect on company performance
  • Vulnerability to foreign exchange movements and the effect of sudden fluctuations
  • Exposure to commodity price instability and the effect on profitability and cash flow
  • Disruptive events that can change the outlook for the sector
  • Emerging market risk and issues specific to small, young economies
  • Application: The impact of the economic cycle on a variety of sectors/the impact of changing commodity prices or FX rates

Themes of Distress (continued)

Challenged Business Models

  • Lack of sufficient scale in an increasing competitive environment; weak part of the supply chain; low added value
  • Excessive growth with inability to finance externally; timing of expansion
  • Higher operating leverage; inability to transfer increased costs
  • Dependency on a small numbers of customers and/or suppliers
  • Financially impaired customers, price competition, CAPEX requirements, reliance on other sectors in distress
  • Application: Changing business models and identifying red flags

Management and ownership strategy and behavior

  • Poor management decisions and risk management
  • Deficient financial disclosure or reporting
  • Complex group structures and cross shareholdings
  • Lack of corporate governance, control of executive management
  • Failing of succession planning, management style
  • Lack of integrity: Behavior, relationships, social responsibility
  • Inability of shareholder to support during turbulent times
  • Exercise: Assessment management strength and weaknesses and shareholder structure/support
  • Illustration case study: Identify early indicators of deteriorating performance in earnings, asset management and cash flow

Themes of Distress (continued)

Disproportionate Leverage

  • Excessive leverage at the top of the economic cycle
  • Debt servicing capability: Anticipating the problem
  • New money needed to restructure or recapitalize
  • Hidden leverage: Off balance sheet obligations
  • Application: Hidden leverage and inappropriate funding structures

Poor loan structure and choice of financial instruments

  • Hybrid financial instruments or complex derivatives
  • Debt denominated in a ‘hard currency’ while domestic currency weakens
  • Illiquid debt instruments
  • Structural subordination
  • Application: Anticipate refinancing problems
  • Illustration case study: Review the financial structure and debt instrument(s)

Crossing the Threshold: Triggers for Action

This segment focuses on the most common events that trigger corporate distress and the need to act.

Cash shortfalls and liquidity problems 

  • Define and assess liquidity
  • Quantify the degree of refinancing risk and the potential challenges and costs of raising new capital
  • Reliance on existing ‘committed’ bank facilities or cash as the sole source of liquidity

Covenant breaches

  • Characteristics of effective covenants
  • Financial vs. non-financial covenants: Ability to quantify and assess the degree of protection
  • Exercise: Identify alternatives when companies face refinancing problems

Final Group Case Study

The aim of the final group case study is to allow participants to apply the framework and tools of analysis to a company in the early stages of deteriorating performance.

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Who Should Attend?

As this is an advanced course, it is most suitable for analysts with two years practical experience, or for those with a strong familiarity of financial statements. It could also be useful for those in banking and finance who have a strong understanding of macroeconomic drivers. While there is a benefit for anyone in banking in taking this course, there should be a strong understanding of corporate financial statements.

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Course Highlights

Real Case Studies

Real company case studies to test your newly learnt skills

CPD Recognized

This course is Continuous Professional Development (CPD) recognized

Highly Interactive

Highly interactive with small group size and industry expert trainers

Frequently Asked Questions

Currently, course can be taken either in an in-person setting or in a live online setting.

Our virtual live online courses are designed to keep the same levels of engagement and networking as our in-person courses. You will attend the course virtually on a set date, at a set time.

What time zones do the courses run in?
Currently, we run live online training across London, New York and Singapore time zones.

How are the courses delivered?
We deliver virtual training via Zoom.

What are the start times?
The courses will run during scheduled class times, and vary per course.

Reclaiming VAT
Most delegates who attend our courses in the UK are able to claim back their VAT once it has been paid. The below information details why we need to charge VAT and how you can claim it back.

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All of our instructors are industry practitioners turned trainers. Their training style is case study based and interactive. They will coach, challenge and inform participants to ensure immediate and practical real-life application from the courses. To discuss our instructors further please email enquiry@fitchlearning.com

Class sizes are dependent on the course, but are small enough to permit active interaction and participation.

Q. Am I able to gain CPD/CE/CPE credits for my course?
A. We award continuing professional development credits for the following:

Global
CFA Institute
The CPD Certificate Service
UK
CFA Society
The CPD Certificate Service

Q. What do I need to do to receive my credits?
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You will be contacted by email within 2 working days of processing your registration to confirm your place on the course.

In order to optimise class time we ask participants to read some background information on the main illustration case(s) prior to attending the class. This also helps to ensure that all are able to participate in case discussions. In some cases additional background reading is provided. The length of pre-course reading is advised to participants in advance and typically ranges from 2-3 hours.

We try to send out the pre-course reading by email one week before the start of the course. There may be a delay in sending this out due either to late registrations or to the fact that the case study needs to incorporate recently-published financial information.

Q. If I am unable to attend can I send a substitute?
A. Absolutely and it is completely free of charge. We do however ask that we have at least 2 working days’ notice of this change before the course start date. Please email enquiry@fitchlearning.com with full contact details of the substitute and who they are replacing.

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A transfer can only be made onto a course taking place within a period of 6 months of the original course date and only one transfer can be made in respect of any booking.

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Email: enquiry@fitchlearning.com

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Email: enquiry@fitchlearning.com
Post: Grace Heighington, Fitch Learning, The Corn Exchange, 55 Mark Lane, London, EC3R 7NE
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Q. What are the stages involved?
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What Our Customers Say

"Very interactive and lively sessions with plenty of chances to ask questions and discuss."

Tala Senan, Medior Credit Analyst

"I really appreciate the real examples Tara used and the interchange with the other participants."

Fiorella Alexandra Lastretto Granda, Investment Strategist

"I really enjoyed working through real life cases and examples to apply knowledge gained in the sessions."

Luc Goedhuys, Associate - Corporate Banking

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