CLO Credit Risk

Duration: 2 Days ・ CPD Points: 16 ・ Level: Intermediate

Delivered by Fitch Learning, in partnership with the GICP.

Are you aiming to enhance your CLO credit risk understanding? Arm yourself with the necessary skills for success and fast-track your career with this immersive course.

Delivery Method Live Online
Location London
Dates 26-27 Nov 24
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Course Details

This two-day course is an overview of the techniques for analyzing the risks in a Collateralized Loan Obligation (CLO). The focus is on the key risks of investing in CLOs, as well as the motivations for issuing/managing CLOs, and the structural elements.

Key Learning Outcomes:

  • Use a structured approach (a technique) for analyzing CLOs
  • Understand the key risk variables and the inputs for a risk model
  • Understand the structural elements of a CLO, why they exist, and their effectiveness
  • Understand the motivations for managing a CLO and for investing in a CLO
  • Understand the reasons for debt tranching and cash flow waterfalls, as well as the techniques

Course Content

Analytic Framework

The goals of this section are to highlight key elements of the CLO market and to establish a framework of analysis for CLOs.

Industry overview

  • CLOs in the context of the high yield market
  • Why CLOs? Motivations behind the deal

Analytic approach to credit evaluation

  • Applying the analytic framework to CLOs: purpose, payback, risks and structure
  • Exercise: examining differences in pre- and post-crisis CLOs

Risks to Repayment

The goal of this section is to consider issues related to the CLO assets and asset managers which could affect repayment of CLOs.

Underlying assets

  • Defining the underlying assets
  • Identifying the key variables which impact likelihood of default and recovery
  • Assessing asset credit quality
  • Default probability: the use of credit ratings, calculating WARF (weighted average rating factor)
  • Recovery rate: examining asset security and adjustments to standard assumptions
  • Impact of covenant-lite loans
  • Importance of diversification
  • Asset concentration and correlation
  • Cash flow analysis: understanding portfolio credit quality under various stress scenarios

Asset manager

  • Scope of manager's role
  • Methodology for assessing CLO asset managers
  • Key man risk
  • Management replacement provisions

Structure

The goal of this section is to understand how the features of CLO transactions address repayment risk and provide returns to investors.

Credit enhancement

  • The role of credit enhancement: loss allocation
  • Sizing: how the level of credit enhancement is determined for the target ratings

Note profile

  • Terms and conditions
  • Ramp up, reinvestment and amortization periods
  • Class X: the role of excess spread
  • Waterfall structures: protecting priority of payments
  • Unravelling payment flows: sources, applications and redistribution of funds
  • Expected and legal maturity; extension risk, optional redemption features
  • Exercise: Unravelling waterfall structures

Structure (continued)

Structural safeguards

  • Target portfolio characteristics and managing to dynamic collateral quality tests
  • Coverage tests (OC and IC): Rationale, definitions and implications
  • Events of default; liquidations
  • Understanding sales, trading and reinvestment criteria and controls
  • Counterparty risk
  • Exercise: Examining CLO coverage tests
  • Exercise: Evaluating structural features of CLOs

Legal framework

  • Bankruptcy remoteness and non-consolidation
  • Validity of transfer/perfection of security
  • Regulatory issues: Risk retention proposals, Foreign Account Tax Compliance Act

Market conditions

  • Relative value: Comparing returns across asset classes
  • Current market topics: CLOs going static, asset manager consolidation
  • CLO market performance

Monitoring Performance

The goal of this section is to highlight the on-going evaluation of CLO programs.

  • Timely and adequate reporting
  • Tracking portfolio changes and performance
  • Asset defaults, restructurings and recoveries
  • Surveillance and rating changes: Expectations vs. performance through the cycle

Who Should Attend?

This course would be ideal for an investment manager who is interested in creating a portfolio of CLOs, a credit analyst covering the risk assessment of CLOs, and any party working with CLOs. From junior structurers, to operations staff, trustees, paying agents, and warehouse facility providers.

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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.

Why does Fitch Learning charge VAT?
The EU VAT Directive (Council Directive 2006/112/EC) article 53 says that for the right of entry to cultural, artistic, sporting, scientific, educational, entertainment or similar events in exchange for a ticket or payment, the place of supply is where the event physically takes place. Since, the event is held in the UK, the place of supply is the UK and therefore UK VAT has to be charged.

How can you claim back the VAT you paid for a course?
The most efficient way to claim back VAT is directly through the UK’s HM Revenue and Customs (HMRC) by completing the required forms and sending back to HMRC.

Please follow the links below for further details;

EU businesses
Non-EU businesses
To claim back VAT or if you have any questions please contact HMRC;

Telephone - 0044 (0) 3000 537 381

Email Overseas Repayment Unit - enq.oru.ni@hmrc.gsi.gov.uk

On the Fitch Learning website you will find learning paths which will explain the courses available at different levels within a topic area. We would always prefer to speak with you to discuss which course is most appropriate rather than run the risk of you signing up for an inappropriate course. If you are unsure, please contact the Public Courses team:

Phone: +44 20 7496 8600
Email: enquiry@fitchlearning.com

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?
A. Please email enquiry@fitchlearning.com to request a certificate. Fitch Learning will send you a certificate stating how many points you are eligible for.

Q. How many credits will I receive?
A. We award 8 credits (7 for the CFA) for each day of training you attend.

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.

Q. Can I transfer my booked course to another date?
A. Yes you can. If you email us your request to transfer to the next available course date and give us more than 30 days’ notice, there will be no charge. If you notify us within 30 days of the course start date, there will be an additional payment of 25% of the course fee, provided the original course fee has been paid in full.
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.

Q. Can I cancel my course booking?
A. Yes. If you email us with your request more than 30 days before the course start date, there will be no charge. If you notify us within 30 days of the course start date you are liable for the full course fees.

Q. What happens if I do not attend my course?
A. If you do not attend your course and you do not give us any prior notice you are liable for the full course fee and no refunds can be given.

Notice contact details:
Email: enquiry@fitchlearning.com

We can develop a customized training solution to meet your learners' needs - at all levels in your organization. Please email enquiry@fitchlearning.com for more information.

Please get in touch with us via email at enquiry@fitchlearning.com to request more information on running one of our courses in-house for larger groups.

Discount offers cannot be used in conjunction with each other or any other offer nor applied retrospectively to anyone already registered for any Fitch Learning course.

To speak to a member of our team, please get in touch via the below:
Phone: +44 20 7496 8600
Email: enquiry@fitchlearning.com

Q. How do I make a complaint?
A. Anyone who wishes to make a complaint may do so in writing. Complaints need not be made to the actual service which is the subject of the complaint. In the first instance complaints should be sent to Grace Heighington, Head of Public Courses.

Q. Where do I send my complaint?

A. Complaints can be submitted using the following options:
Email: enquiry@fitchlearning.com
Post: Grace Heighington, Fitch Learning, The Corn Exchange, 55 Mark Lane, London, EC3R 7NE
Wherever possible and appropriate, staff are requested to elicit from the complainant the nature of the complaint, as well as the actions the complainant feels are necessary to resolve the complaint.

Complaints Policy and Procedure
Q. What are the stages involved?

A. There are two main stages to our complaints procedure:

Stage 1 - We always try to resolve issues quickly. From the moment we receive your complaint, we must get back to you within three working days. At the very least we must acknowledge the problem in writing and give you the name of the person dealing with the complaint. We must give you a full reply within ten working days if possible, or keep you fully informed of the progress and reasons for delay.

Stage 2 - If you are not happy with the full response at Stage 1, please contact us again. One of the Managing Directors will then review the issue. You can expect our acknowledgement within three working days of us receiving your complaint. We will also explain how long the director's review will take.

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