Corporate Failure - Early Warning Signs

While credit defaults have been at historically low levels, corporate failures, due to uncertainties in the economy and financial markets, appear to be increasing. Participants in this course learn the skills necessary to proactively identify companies that may be experiencing financial problems, using the latest market tools available to effectively monitor performance.

19-Jun-2008 -- 20-Jun-2008ChicagoUSD$2375
NY Institute of Finance - Chicago9:00am - 4:30pm Instructional Method:
Group-Live
Instructor(s): [ Henry Pullman; ] Thu Fri Level: Intermediate
CPE Credits: 14

06-Nov-2008 -- 07-Nov-2008New YorkUSD$2375
NY Institute of Finance - Midtown9:00am - 4:30pm Instructional Method:
Group-Live
Instructor(s): [ Henry Pullman; ] Thu Fri Level: Intermediate
CPE Credits: 14

13-Nov-2008 -- 14-Nov-2008ChicagoUSD$2375
NY Institute of Finance - Chicago9:00am - 4:30pm Instructional Method:
Group-Live
Instructor(s): [ Henry Pullman; ] Thu Fri Level: Intermediate
CPE Credits: 14

Credit and financial analysts, credit officers, credit managers and investment managers.
No advance preparation required.
Students will be able to:
  • Appreciate the importance of the credit cycle
  • Have a better understanding of the current state of the credit markets
  • Gauge company performance using ratio analysis
  • Recognize the effects of accounting irregularities
  • Gain insight into the rating agency approach and the inherent differences with lender/investor analysis
  • Understand the importance of valuation in credit analysis
  • Appreciate the analytical benefits and pitfalls of EBITDA
Basic understanding of accounting fundamentals
Day One

Where are we in the credit cycle?

  • The role of credit analysis & risk management
  • Volatility in the Market Place
  • Overview of default rates
  • Overview of bank write-offs
Exercise: Review JP Morgan Chase's annual report section on risk

The Rating Agencies - The Heat is on

  • The rating agency approach - Rate through the cycle
  • Why rating agencies lag the debt and equity markets
  • The rating outlooks
  • The vicious circle - How rating downgrades can trigger liquidity crises
  • Analysis - the difference between the banks and rating agencies
Exercise: Participants examine the effect of ratings downgrades on several corporates

Causes of Decline - Industry and Corporate Analysis

  • Utilizing a risk evaluation framework
  • Economic and Industry outlook
  • Company specific analysis
  • The Porter Model
  • The Dupont Model
  • Review of Management
Exercise: Participants evaluate Chairmen's letters from three corporations

Chills in the Balance Sheet Shadows

  • The business cycle and working investment
  • Financial flexibility - access to the markets
  • Analyzing goodwill and intangibles - what are they worth?
  • Off balance sheet items
  • Leases, partnerships, contingent liabilities
Exercise: Participants review the off-balance sheet liabilities of Amazon and Ford and comment on ''real'' leverage and the firm's ability to service debt

    Homework: Case study on Amerco aka UHAUL

Day Two

What do the Cash Flows Statements tell us?

  • Interpreting cash flows
  • Differences between company produced and derived cash flows
  • Factors influencing cash flows
  • Operating cash flow, net operating cash flow, EBITDA
  • Pitfalls of EBITDA
  • Cash flow ratios
Exercise: Demonstrating the importance of cash flow.

Creative Accounting - It's just not Enron and Worldcom

  • Sunbeam
  • Waste Management
  • Cendant
  • Is there a common thread?
Exercise: Creative accounting exercise

Market Factors

  • What does the share price have to do with the loan
  • Overview of Corporate Finance theory regarding stock valuations
  • The reaction of the bond markets
  • The use of KMV and Credit Grades
  • Other market clues for signs of distress
Exercise: Using market tools to find signs of distress

Distress signs identified - what to do next?

  • Documentation and communication
  • Covenant compliance and tracking
  • How to reduce the risk
  • The role of credit derivatives
Exercise: Prescribing a solution for Americo aka UHAUL

Clients who register for this course will receive a complimentary 6 month subscription to the Financial Times and FT.com. The Financial Times is the world's most respected financial newspaper providing a broad assessment on finance, business and the industrial sector. Subscriptions will start within 6-8 weeks of the application process, and are limited to one per client. For questions about your subscriptions call 800-628-8088 or email uscirculation@ft.com. US and Canada enrollees only.

Lunch included for all students taking day classes.