Overview

World financial markets experience rapid spurts of movements, upturns & downturns alike. While upturns are favourable, that is not always the case. It’s the downturns which pose the most threats and increase the probability of default. In this ever changing environment, it is essential to analyse to what extent an individual customer, an organization, or a business is susceptible to credit deterioration. To address this issue, Times Professional Learning has partnered with Fitch Learning to bring to you the first ever public program in India on “Warning Signals & Lessons Learned in Corporate Credit.”

Fitch Learning is the training & professional development arm of the Fitch Group. The Fitch Group consists of Fitch Ratings, Fitch Learning, BMI Research & Fitch Solutions, and has its presence in over 30 countries.

Who Can Attend

This program will benefit:

  • Fixed Income professionals
  • Credit & Risk professionals
  • Corporate Bankers, Analysts, Corporate Risk Underwriters, Risk Managers
  • Portfolio Managers, Relationship Managers & Debt originators
  • Those having a fair understanding of the analysis of financial institutions

Program Objectives

  • To refine analytic skills to identify & assess credit deterioration
  • Help determine a firm’s ability to improve performance or repair the current capital structure
  • Draw upon the credit crisis to determine sustainable levels of indebtedness, robustness of deal structures, how to limit losses to banks
  • Examine current market trends & highlight potential risk trends

Key Benefits

Fitch’s public courses are focused on specific professional development topics & are suitable for individuals or small groups with specific needs.

Instructors, Content & style are our USP’s
  • Instructors : They are experienced professionals who will deliver using real life examples. Learn how to understand the subject matter & put topics into content
  • Up to date Content : You will work through current, region specific case studies from real companies. This will enhance application based learning.
  • Interactive : Practice what you learn before applying it at your workplace Highly interactive program. This discursive style instils confidence in your decision making abilities
At the end of the program, we award continuing professional development credits for:
  • CFA Institute
  • CISI (Chartered Institute for Securities & Investment)
  • GARP (Global Association of Risk Professionals)
  • AIA (Association of International Accountants)
  • IFC (Institute of Financial Consultants)
  • You will receive:
  • 8 credits (7 for CFA) for each day of training

Learning Outcomes

  • Identify companies most susceptible to credit deterioration & factors that will impact the likelihood of default
  • Review a company’s funding structure to determine whether the structure will mitigate credit deterioration
  • Appreciate the importance of safeguards to enable early intervention in deteriorating credits

Course Content

Recognize symptoms & structured approach to gauge credit deterioration.The goal of this section is to recognise early warning signals by applying a structured approach to evaluate credit risk.

Early Warning Signals
  • Symptoms of a deteriorating credit: financial, non-financial and market indicators
  • Credit migration and its impact on pricing and market access during turbulent times
  • Weakened versus problem credits
  • Current market conditions: impact of the credit crunch and economic downturn, default and recovery rates.
Structured analytic approach
  • Application of the four-step approach to credit: exposing credits susceptible to deterioration (purpose, payback, risks and structure)
  • Risks to repayment: current market conditions and their impact on risk assessment
  • Exercise: Identify the true purpose of borrowing and expected source of repayment in order to anticipate the key risks to repayment.

Identify themes of distress through real life cases.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 in order to avoid future problems.

Macro-economic & sector indicators
  • Economic cyclicality in various markets and the sometimes 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
  • Exercise: evaluate a company’s vulnerability to foreign exchange and commodity price fluctuations
  • Country exposure: Sovereign weakness, government intervention or cessation of government support.
  • Exercise: identify the key measures of the strength of a sovereign entity.
Challenged business models

Lack of sufficient scale in an increasing competitive environment:

  • Excessive growth with inability to finance externally
  • Timing of expansion
  • Higher operating leverage when competitors are leaner operators
  • Dependency on a small numbers of customers and /or suppliers
  • Illustration Case Study: identify early indicators of deteriorating performance in earnings, asset management and cash flow.
Disproportionate leverage
  • Excessive leverage at the top of the economic cycle
  • Debt servicing capability: anticipating the problem
  • New money needed to restructure or recapitalise
  • Exercise: assess which companies are vulnerable to credit deterioration due to inappropriate funding structures.
Refinancing risk
  • Importance of maintenance of liquidity and payment readiness in turbulent financial markets
  • Relying on “committed” bank facilities as sole source of liquidity
  • Refinancing challenges: longer term debt, equity injection, alternative sources of funding
  • Exercise: evaluate a company’s liquidity and identify strategies to improve a stressed situation.
Poor loan structure and choice of financial instruments
  • Ineffective financial and non-financial covenants
  • Potential covenant breaches and actions when breached
  • Excessive off balance sheet obligations
  • Hybrid financial instruments or complex derivatives
  • Debt denominated in a ‘hard currency’ while domestic currency weakens
  • Exercise: identify risks in a company’s debt structure.
Management and ownership strategy and behaviour
  • 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: behaviour, relationships, social responsibility
  • Inability of shareholder to support during turbulent times
  • Exercise: assessment management strength and weaknesses and shareholder structure / support.
Crossing the Threshold: Triggers for Action

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

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.

Program Delivery

The program is a 2 day face to face program, delivered by an industry expert professional. The program will draw from real examples and will provide a foundation for implementation of learnings through business exercises.

Program Dates

Tentative Dates: 8th & 9th March 2018

Programme Fee

Course Duration

2 Days

Timings

9 am to 5 pm

Program Fee

Rs. 80,000  + GSTper participant

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