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If every debt investor took our training, they would...

already know what to do before the sh*t hits the fan.
properly respect the f-bomb: fulcrum!
understand importance of capital structure implications.
utilize legalese in credit agreements to maximize returns.

Who's smarter - debt or equity?

Raison D'être

Debt exists to maximize equity returns… or not?

Devil's in the Details

Interepet and analyze the dense legalese of credit agreements.

Capital Structure Arbitrage

Identify fulcrum and distressed investing in turnaround situations.

Who needs this?

Professionals in (or looking to transition into) these fields:

Credit and Commercial Banking Debt and Distressed Investors Turnaround and Special Situations Capital Structure Arbitrage

…and all finance professionals up and down the entire capital stack.

  • Properly evaluate or underwrite debt facilities
  • Know all the tricky prepositions that can redefine "covenants"
  • Identify the point in capital structure for maximum returns

Course Sections

Section 1

Credit and Risk Analysis

You may already know the 5 C’s of Credit, but there’s so much more to examine.

Identify all the key qualities of solvency from the top-down and bottom-up, and integrate market dynamics when quantifying creditworthiness.

Section 2

Credit Agreements and Covenants

We discuss the legal aspects of issuing debt by looking at major sections of debt agreements and legal/financial covenants.

Walk through events of default, technical defaults, loose vs. tight covenants, and more.

Section 3

Distressed Investing

Familiarize yourself with the world of firms going through restructuring or bankruptcy. That means DIP financing, Section 363 sales, Chapter 11, and Chapter 7.

Build a distressed sensitivity model that reveals various outcomes based on key value drivers, and conclude with an analysis of the fulcrum security.

Section 4

13-Week Cash Flow (TWCF) Modeling

Establish a foundation for forecasting and modeling a business’ core cash needs.

Distinguish a TWCF model from a traditional model: there’s much more to it than just payroll periods.

Section 5

Recapitalization Modeling

Take a broad overview of recaps, debt/equity swaps, and key credit ratios.

Analyze several recap strategies directly in an Excel model. As usual, it’ll be complete with a summary and sensitized based on different scenarios of credit/leverage statistics.

Training Methodology

Our approach is to teach you how to fish, rather than give you a fish.

We don't give a one-way lecture where you memorize every cell and formula.

We nudge you toward uncovering answers on your own by leading with the right questions.

The end result? Longer-term knowledge retention that will last an entire career.

I build models nearly on a daily basis and the training showed me techniques to improve my efficiency in modeling, such as the great shortcuts … and the most effective functions for each purpose, which I now use on a daily basis to improve the quality of my work.
You'll walk out of this class with new tools you can use right away:
  • Understand how to underwrite and evaluate debt issuances
  • Give credit lawyers a run for their money
  • Spread credit comps to price debt securities
  • Get out of sticky situations with turnarounds, special situations, and distressed cases
Not bad for a few days' work.

Get Started

Detailed Curriculum

Credit & Risk Analysis Training

Learn to analyze and understand the factors driving the risk / reward profile for a borrower and its debt securities. Many independent elements impact a borrower’s creditworthiness and the value of its loans; however, true mastery of credit analysis demands an integrated perspective, weaving these disparate parts into a comprehensive, big-picture mosaic.

This program’s goal is to assist you in developing a comprehensive foundation in credit analysis. Our framework for evaluating credit begins with the fundamentals; traditional and universally-accepted elements reviewed by lenders: the Character, Capital, Collateral, Capacity, and Conditions (the “Five C’s”) of debt and the debtor. These basics support building a stronger foundation to understand the qualitative and quantitative factors impacting a firm’s ability to repay interest and principal. Learn the qualities which most impact a firm’s solvency from a top-down analytical perspective, beginning with global economic trends and business cycles. Further assess a company’s credit quality with a bottom-up analysis, evaluating the firm’s performance relative to its peers. Finally, drill down even deeper to assess the structure of the company’s debt securities and the potential value from specific attributes protecting creditors’ investment.

Leverage your foundation to understand how major ratings agencies assess credit and ratings are determined. Learn which elements of credit are most relevant to the agencies and which are evaluated less rigorously. Compare the rating methodologies and contrast the meanings of the underlying credit ratings across credit ratings agencies. Understand how ratings changes can have drastic effects on a security’s market pricing.

In addition to employing these academic practices and standard methodologies in evaluating a debtor’s creditworthiness, you will also learn and integrate real world market dynamics into your credit analysis. Examining the impact of qualities such as market liquidity and the long-term objectives of creditors provides further visibility into the borrower’s risk / reward profile. Reviewing additional considerations that impact a loan’s risk / reward profile, including counterparty risk and concentration risk, adds deeper insight into a position’s creditworthiness.

Recognize the actions and tools sometimes applied by lenders to mitigate credit risk, including credit derivatives and insurance, credit tightening, and portfolio diversification. Understand the costs and benefits of utilizing these tools, and the scenarios in which they are most effective. Finally, put your comprehensive foundation into practice by creating an actual credit review write-up.

The comprehensive analysis of a debtor and its securities from both the top-down and the bottom-up will allow you to judge a company’s creditworthiness with a greater breadth and depth of understanding relative to many other market participants. This real world analysis, integrating established methodologies with the tools used by front-line Wall Street credit analysts, is a comprehensive foundation for credit review and analysis.

5-Day Credit Risk Training Course
  • Day 1: Overview of Credit and Lending
  • Day 2: Create a Credit Memo
  • Day 3: Covenants & Credit Agreement Analysis
  • Day 4: Covenant Comps & Debt Comps
  • Day 5: Capstone Credit Memo & Presentation
Debt & Lending Overview
  • What are some of the advantages of borrowing capital? Disadvantages?
  • How do debt and equity investors differ in their approach to risk and reward?
  • List the standard elements examined by lenders, and define the importance of each
  • Understand the perspectives taken by analysts in evaluating credit, and sell-side vs. the buy-side differences
  • Why is a security's position in the capital structure important?
  • Why is a company's capital structure relevant to the firm's value?
  • Who are the main ratings agencies and what role do they play? Understand why a loan's price isn't necessarily related to its credit rating
  • How do the major credit ratings agencies evaluate debt or a debtor?
  • How do the major credit rating agencies approach the rating process differently? How do ratings at similar levels differ across the agencies?
Market Factors
  • Why are some industries / sectors preferred by debt investors over others?
  • Evaluate the impact of fixed costs and barriers to entry in shaping an industry and its competitive dynamics
  • Review the competitive dynamics of a market by analyzing Porter's Five Forces of competitive intensity
  • How does a company's headquarters or geographic profile impact its creditworthiness and risk / reward profile?
  • Analyze the risk of government regulation / intervention, and the potential impact of this on an industry
  • Differentiate between cyclical, seasonal, and secularly shifting sectors
  • Determine at what point in the economic cycle a specific industry / sector is expected to grow, and at what point it is expected to decline
  • In what circumstances is a company operating in a declining industry not necessarily a bad investment?
  • Recognize industry trends and metrics used to measure performance
  • Predict the impact that global capital markets activity may have on the structure of loan documents
  • Describe how a change in interest rates or future interest rate expectations can impact current debt pricing. Which types of debt securities are most sensitive to this risk?
  • Explain how macroeconomic factors can influence counterparty risk
  • Describe how historical or recent events may influence a lender's perception of a borrower
Company Factors
  • Calculate a firm's credit ratios, and evaluate how they compare to the company's peers. Analyze what these ratios mean for the company from a credit analysis perspective
  • Evaluate whether a company is a leader or a laggard within its sector
  • Conduct an analysis of the company's Strengths, Weaknesses, Opportunities, and Threats (SWOT Analysis)
  • How will a company's owners, and lenders, influence the company's value? Understand the conflicts of interest between equity holders and bond holders
  • What factors do major rating agencies typically not take into account when rating a bond, loan, or note?
  • Examine a firm's financial ratios to determine its operational success and the management's performance in efficiently running the business
  • Describe the potential conflicts of interest between a debtor's management team and the creditors. List several counterbalances that lenders can utilize to control or this conflict
  • Explain why asset coverage is a significant factor for a lender. Describe one way borrowers previously took advantage of this perspective, and explain why they typically can no longer do so
  • How can the Use(s) of Proceeds impact the pricing of a loan? Describe some Use(s) of Proceeds that are generally viewed favorably by creditors, and some that creditors view unfavorably
  • Given a change in a company's financial or operational condition, determine the effects on the borrower's cash flow and ability to repay the loan
  • What options are available to a company when a loan's maturity is imminent but they lack adequate cash / cash flow to pay back the debt?
  • Understand the "early warning signs" of a deterioration in a borrower's creditworthiness
  • Distinguish between a financially distressed firm and an operationally distressed firm
Security Analysis
  • Understand structural protections typically afforded to security investors, and why they are important
  • What are the most common covenants and loan terms? Assess the impact from a security's possessing tighter or looser terms relative to its peers
  • Explain the most common loan and pricing structures, and under which circumstances each would be most appealing to borrowers and to lenders
  • Why do more senior loans typically mature prior to less senior loans?
  • Consider the liquidity of a security and its impact on the loan's value. How do a firm's lenders, and the lenders' strategies, influence the security's liquidity? How do they influence its value?
  • Differentiate between counterparty risk at the macroeconomic level and at the individual holder level
  • Distinguish between the disparate components which may comprise a bond's yield - principal repayment, cash interest, and PIK interest - and evaluate the circumstances in which each might be preferred relative to the others
  • Identify reasons for a security's price fluctuations that are isolated from the security's underlying value
  • Describe the steps taken by lenders to mitigate credit risk, and characterize the scenarios in which each action may be most effective
  • What are the advantages or disadvantages to portfolio diversification? Understand how diversification influences an individual security
Case Studies & Credit Memo
  • Compare and contrast loose covenants, tight covenants, covenant-light agreements, and covenant-tight agreements
  • Evaluate the impact of certain provisions on a loan's recovery by examining historical outcomes
  • Review the segments typically included, and concerns generally addressed, in a comprehensive analysis of a bond, loan, or note
  • Create a formal credit review write-up
  • Accounting & Financial Statements Integration
  • Company Overview
  • Finance 101: Introduction to Finance
  • Corporate Valuation Methodologies

Understand the legal aspects of issuing bank debt and corporate bonds by analyzing major sections of debt agreements and legal and financial covenants. Comprehend the major types of covenants found in credit agreements and bond indentures: affirmative, negative and financial. In addition, delve into maintenance and incurrence covenants, reps and warranties, indemnities. Learn objective of relevant credit agreement provisions and common related structural issues and thoroughly analyze senior credit agreements covenants and high-yield bond covenants. Understand implications of covenants on “events of default” and differentiate between technical defaults as well as compare and contrast “loose” vs. “tight” covenants and covenant-light and covenant-tight agreements.

Debt & Lending Overview
  • Capital Structure & Implications on Loan Seniority
  • Lender Concerns, Borrower Creditworthiness & Measurement & Ratings Agencies
  • Bank Debt / Senior Secured Loans Overview
  • Bank Debt comparison with High Yield notes
Credit Agreements
  • Introduction to Credit Agreements
  • Role of Covenants
  • Administrative Agent
  • Defaulting on Credit Agreements: Types of Default and Post-default
  • Debt Tranche Interdependence: Conflicts of Interest & Cross-Defaults
  • Relative importance of Bank Debt to High Yield note covenants
  • Formal Sections of Credit Agreement: Introduction to Solutia Case Study
Standard & Variable Provisions of the Credit Agreement
  • Explanation of standardization
  • General Overview of major CA sections
  • Section summary specific to Solutia case study
  • Title Page: Importance of Legal Borrower, Corporate Structure Overview
  • Table of Contents
  • Recitals: Detail on Guarantors
  • Definitions: Emphasize importance of definitions due to variability across CAs
  • Loan Terms: Detail on amortization structures of loans, company-specific amortization preferences
  • Representations & Warranties
  • Conditions (to closing)
  • Events of Default: Overview of cure period & amendments
  • Other & Voting majority
Covenant Overview & Detail
  • Covenant Summary
Covenants: Affirmative Covenants
  • Role as reporting covenants
  • 1.1 Financial Statements
  • 1.2 Certificates & Other Information
    • Insider Access / Information Arbitrage
    • Solutia EBITDA definition to exemplify reporting complications
  • 1.3 Other Events
  • 1.4 Environmental Matters
  • 1.5 Geography / Timeline Importance
  • 1.6 Additional Collateral & Guaranties
  • 1.7 Additional Affirmative Covenants
    • Maintenance of Corporate Existence
    • Payment of Obligations
    • Maintenance of Property & Insurance
Covenants: Negative Covenants
  • Role of Negative Covenants
  • 2.1 Indebtedness
  • 2.2 Liens
    • Importance of Liens in collateral protection
    • Restricted Liens
  • 2.3 Investments
    • Permitted Investments
  • 2.4 Asset Sales
    • Sale & Leaseback Transactions
  • 2.5 Prepayments of Indebtedness
  • 2.6 Fundamental Changes
  • 2.7 Transactions with Affiliates
Covenants: Financial Covenants
  • Maintenance & Incurrence Covenant Overview
  • 3.1 Maintenance Covenants
  • 3.2 Incurrence Covenants
    • Example of Incurrence break & compliance, while within Maintenance Covenants
Covenant-Lite Credit Agreements
  • Excluded Covenants
  • Comparison with Traditional Loans
  • Standard Credit Agreement to diluted CA to lite CA evolution
  • Re-emergence
  • Accounting & Financial Statements Integration

This course walks through the concepts behind company recapitalizations (recaps) and quantifies the impact of the various approaches available. The first section opens with a high-level discussion of recaps and debt/equity swaps. Next is a brief primer on key credit ratios and how they can be implemented with best practices in Excel. The meat of the course then begins, reviewing multiple recapitalization strategies one by one, thoroughly explained qualitatively and executed quantitatively in a working Excel model. Afterward, these results are analyzed before wrapping up with a complicated scenario and sensitivity layer that can determine viable scenarios based on different assumptions of credit/leverage statistics. What’s left is a comprehensive model capable of simulating strategies for any recap situation.

Intro to Recapitalizations
  • Understand the definition of a recapitalization, including the parties and subjects involved
  • Identify a recapitalization's general motivations and consequences
  • List several real-world use cases of recaps with an emphasis on standard debt-for-equity swaps
Plain Debt Sweep & Credit Ratios
  • Review basic mechanics of financial statements to understand a debt sweep's structure
  • Create a simple debt/interest schedule in Excel using real historical financial statements
  • Discuss and calculate various key credit ratios including leverage, net leverage, FCCR, and interest coverage
  • Quantify the impact that changes to revenues/expenses have on EBITDA and cash flow
Recapitalization Model Enhancement - Swap with Term Loan
  • Implement a third recap option that breaks out a second lien term loan from aggregate tranche
  • Allow the user to modify the amortization schedule for the term loan
  • Learn the implications of this term loan on the mandatory payment schedule
Recapitalization Model Enhancement - Swap with Paid-in-Kind (PIK) Debt
  • Implement a fourth recap option incorporating the conversion of the debt/equity swap's balance to PIK debt
  • Fully integrate all the PIK components into the model, noting the PIK's impact on cash flow
  • Add "cash interest" alternatives for potentially misleading ratios such as EBITDA/Interest and EBIT/interest
Plain Debt Sweep & Credit Ratios
  • Review basic mechanics of financial statements to understand a debt sweep's structure
  • Create a simple debt/interest schedule in Excel using real historical financial statements
  • Discuss and calculate various key credit ratios including leverage, net leverage, FCCR, and interest coverage
  • Quantify the impact that changes to revenues/expenses have on EBITDA and cash flow
Recapitalization Model Enhancement - Scenario Pairing
  • Lay out different scenarios depending on assumed credit/leverage statistics
  • Modify the model to easily switch between viable scenarios
  • Create ratings statistics tables for the scenarios to quickly gauge the available options
Recapitalization Model Enhancement - The Works
  • Implement a fifth recap option incorporating the debt/equity swap, a term loan, and PIK debt
  • Add a "Cash DSCR" ratio and utilize Excel's conditional formatting to draw attention to unfavorable scenarios
  • Carefully re-examine DSCR under the fourth and fifth recap options to clarify an otherwise simple analysis
  • Select the best courses of action (per case) to recapitalize, and develop a solid understanding of managing cash flow

Package: Distressed Modeling

Learn how to analyze and value distressed companies and securities undergoing restructuring or bankruptcy process. First, appreciate and understand the historical perspective and context of the distressed market. Then, explore various opportunities in distressed investing from securities types to investment strategies. Properly identify and isolate the true sources and drivers of returns from supply & demand to operational changes to market rebound to recapitalizations. Quantify and comprehend the dramatic changes to a distressed firm’s capital structure and the implications on the valuation process and realignment of economics. Understand the reorganization and bankruptcy process, including DIP (debtor-in-possession) financing, Section 363 sales (stalking horse), Chapter 11 reorganization, and Chapter 7 liquidation. Fully comprehend the key critical covenants required involved in distressed securities as well as the entire turnaround & restructuring process by identifying key parameters for successful business plan implementation.

  • Understand distressed investing, different investment strategies & valuation and bankruptcy process
  • Comprehend capital structure pre- and post-petition, significant of identifying fulcrum security
  • Comprehend the complexities and nuances involved with distressed analysis
  • Accounting & Financial Statements Integration
  • Corporate Valuation Methodologies
  • Basic Financial Modeling
Video Length / Estimated Total Course Time

2.5 hours / 4 hours

Learn how to model and value distressed companies and securities undergoing restructuring or bankruptcy process. Build upon our Distressed Investing Overview course by quantifying the dramatic changes to a distressed firm’s capital structure and the implications on the valuation process and realignment of economics. Build robust distressed sensitivity financial model. Learning objectives include: model out sample distressed company on a standalone basis, with and without restructuring; incorporate detailed valuation sensitivity to identify key value drivers in a distressed situation; analyze the fulcrum security based on various valuation and leverage scenarios.

Distressed Financial Modeling
  • Summarize pre-petition capital structure of distressed situation & determine normalized valuation
  • Construct standalone Income Statement project of distressed company
  • Layer on various restructuring and turnaround scenarios
  • Evaluate & analyze decision to restructure and understand financial implications on valuation
  • Construct super-dynamic and flexible model to automate new vs. old cash flow capital structure
Distressed Financial Modeling & Sensitivity Analysis
  • Construct robust sensitivity analysis to determine ultimate recovery to capital structure classes
  • Sensitize distressed model based on leverage, valuation, new pro forma capital structure
  • Analyze what constitutes a "bad" deal and its implications for the distressed investor
  • Understand and appreciate various financial stakeholders and inherent conflicts of interest
  • Quantify and evaluate the importance of determining the right fulcrum security
  • Distressed Investing Overview
Video Length / Estimated Total Course Time

3 hours / 5 hours

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