Paper 8

CORPORATE CREDIT ANALYSIS

The paper is intended to equip the candidate with the knowledge, skills and attitude that will enable him or her to make effective corporate lending decisions.

On completion, a candidate should be able to

Undertake credit analysis for dynamic corporates
Appraise risk tendencies of an entity's management team and their influence on financial and operating decisions affecting creditworthiness
Assess credit risk of debt instruments
Examine the impact of debt instruments and debt structures on firm's recovery prospects in case of insolvency.
Evaluate the shaping of a corporation's business by action of a sovereign government.

Content

1
Overview of Credit Analysis
1. 1.1
  Lending philosophy
2. 1.2
  Identifying credit opportunity
3. 1.3
  Stages of analysis to a credit proposition
4. 1.4
  The credit decision
5. 1.5
  Credit monitoring
2
Overview of Corporate Borrowers
1. 2.1
  Types of corporates and their key features
2. 2.2
  Considerations in lending to corporates
3. 2.3
  Credit Risks associated with various corporates
4. 2.4
  Considerations in lending to groups of companies/conglomerates
3
Corporate Strategy and Credit risk
1. 3.1
  Analysis of Credit Risks inherent in a corporate's:
  1. 3.1.1
    Business strategy
  2. 3.1.2
    Business model
  3. 3.1.3
    Financial strategy
  4. 3.1.4
    Marketing strategy
4
Structuring Credit Products
1. 4.1
  Objectives and process of facilities structuring
2. 4.2
  Loan agreements and covenants
3. 4.3
  Covenant clauses in lending
4. 4.4
  Facility pricing and structuring
5. 4.5
  Loans amortisation
5
The Management Factor
1. 5.1
  Managerial behavior and corporate's credit profile
2. 5.2
  Competences of key management positions
3. 5.3
  Assessment of corporate governance
4. 5.4
  Influence of management actions on corporate performance
6
Corporate Financial Risk Analysis
1. 6.1
  Importance of financial policies in Credit analysis
2. 6.2
  Firm's risk tolerance
3. 6.3
  Credit measures relative to financial reports
4. 6.4
  Forecasting and sensitivity analysis of corporate cash flow drivers.
7
Credit Risk on debt instruments
1. 7.1
  Types of debts instruments
2. 7.2
  Debts instruments pricing
3. 7.3
  Insolvency regimes and debt structures
4. 7.4
  Estimating recovery prospects on debt instruments
8
Industry Credit Risks
1. 8.1
  Credit profiles of various industries and sectors
2. 8.2
  Industry lifecycle stages
3. 8.3
  Patterns of business cycles and seasonality
4. 8.4
  Limitation of a corporate's credit quality by specific industry risk
9
Analysis of Sovereign and Country risks
1. 9.1
  Impact of countries' rules and regulations business activity and credit risk
2. 9.2
  Influence of political, legal and financial systems on corporates' credit risk profiles
3. 9.3
  Shaping of credit risk by a country's infrastructure and natural endowments
4. 9.4
  Country macroeconomic policies and corporate credit risk
10
Credit monitoring and control
1. 10.1
  Managing loan portfolio
2. 10.2
  Identification of warning signs of bad and doubtful debts
3. 10.3
  Early symptoms of financial distress
4. 10.4
  Dealing with problem accounts
5. 10.5
  Causes of credit deterioration and its control
6. 10.6
  Corporate remedial action - Recovery and restructuring
7. 10.7
  Loan workouts