Business Risk Analysis

Business and Community Banking

Content

This program provides participants with an overview of the key considerations which drive the operating performance of any business, with a particular emphasis on the risks which undermine the creditworthiness of the business.

• Business Profiles: Review of different types of businesses in Business and Community Banking with a particular focus on small and medium sized enterprises (SMEs), including manufacturers, wholesalers and distributors, and service businesses
• Key Business Drivers: A review of the borrower’s competitive landscape, market dynamics, customer relationships, supply chain management, and relative pricing power in its market
• Industry Risks: Economic, cyclical, seasonal as well as those industry drivers over which an SME borrower has no control – commodity prices, FX movements, and regulatory interference
• Markets and Competition: Identifying the SME borrower’s particular specialty or niche role in its industry, with particular emphasis on its competitive advantage
• Assessment of Management: A review of existing management, their economic interest in the company, their management succession plans, and in particular management’s proven ability to manage for the industry risks in general, and the business risks in particular

Methodology

Using real life case examples taken from general manufacturing, wholesaling and distribution, and service industries, the program will comprise a series of group exercises aimed at evaluating and articulating their respective business risks.

The program will provide a framework for business risk identification and how such risks can be managed internally by good management and monitored and controlled externally by good lending practices.

Financial Statement Analysis

Business and Community Banking

Content

Building on the qualitative disciplines established in the Business Risk Analysis program, this Financial Statement Analysis program provides the Business and Community banker with the ability to identify and calculate the key income statement and balance sheet measurements used to quantify the client’s business profile.

Particular attention will be given to:

• Cash Flow Drivers: Identification of the key accounting measurements from the income statement and balance sheet which the banker should select in measuring quantitatively the company’s financial performance
• Income Statement - Operating Performance Analysis: a review of the revenue growth, gross margin, EBITDA margin, operating margin, and net margin, and how such measurements should be incorporated into the bank’s credit analysis internally and customer discussions externally
• Income Statement - Debt Servicing Analysis: A review of the key metrics used by banks to determine the business and community banking client’s ability to service its debt using debt service coverage, fixed charge coverage and debt/EBITDA multiples.
• Balance Sheet – Liquidity Analysis: a review of key liquidity measurements such as current and quick ratios and working capital
• Balance Sheet Efficiency: a review of the key asset utilization measurement or ‘swing factors’ particularly accounts receivable, inventory and accounts payable, and days outstanding
• Balance Sheet – Leverage Analysis: a review of such key measurements such as assets/equity, liabilities/equity, funded debt/equity, and funded debt/EBITDA

Methodology

Using practical case examples and standard bank financial statement spreading systems, the program is designed to enable participants to calculate the key ratios used in financial statement analysis and to draw the appropriate analytical conclusions. In addition, the program will also incorporate practical exercises enabling participants to see how such analysis is incorporated into a business or community bank’s credit write-up when analyzing SME customers.

Understanding the Working Capital Cycle

Business and Community Banking

Content

Building on the skills covered in the Business Risk and Financial Statement Analysis programs, this program is designed to provide participants with an outline of the importance of working capital and a bank’s role in financing such needs.

Strong emphasis will be placed on the potential risks in the breakdown of the borrower’s working capital cycle and how such risks can be proactively identified ahead of time.

• Working Capital – The Accountant’s Approach: A review of the traditional approaches to measuring liquidity, with a particular emphasis on current ratio, quick ratio and working capital analysis
• Working Capital – The Banker’s Approach: A review of the breakdown of the cash collection cycle of accounts receivable days, inventory days, and accounts payable days, and assessing how long the SME borrower is ‘out of cash’ and therefore dependent upon the bank
• Net Working Capital: How the reconfiguration of net or operating working capital can be used to proactively identify credit risks in the borrower and its ability to convert its revenues and profits into cash
• Working Capital and the Release of Cash: A review of how good operating and financial management can de-risk a borrower’s debt profile through faster collection of receivables, improved inventory management, and appropriate use of trade credit
• Permanent vs. Seasonal Working Capital: A review of short term vs. long term working capital assets and the most appropriate ways by which these should be financed by a business and community banker

Methodology

Building on practical cases with examples from general manufacturing, wholesaling and distribution, and service companies with an SME profile, the program will focus on developing working capital analytical techniques.

These techniques will enable business and community bankers to proactively identify risks and opportunities in the working capital cycle and how these risks and opportunities should be managed and underwritten.

Cash Flow Analysis

Business and Community Banking

Content

An introduction to cash flow analysis and forecasting skills for the business and community banker with a focus on the following key disciplines:

• Cash Flow Statement Derivation: Introduction to the cash flow statement and how it is derived from the income statement and the balance sheet
• Cash Flow Statement Objectives: Review of how the cash flow statement identifies the key operating, investing, and financing decisions taken by the borrower
• Cash Flow Construction: Introduction to cash flow statement construction and the analytical conclusions drawn from the statement
• Cash Flow Analysis: Examination of the cash flow statement and how it is used to determine first, the company’s debt servicing capability, and, second, the risks facing the company in the future
• Cash Flow Statement as Capital Allocation Tool: review of how the statement highlights how a company has raised and allocated its capital and used the proceeds of its bank loans
• Cash Flow as Primary Source of Repayment: analysis of the cash flow statement as a vehicle for forecasting the company’s future cash flows as the primary source of repayment of the bank loan and identifying suitable alternative secondary and tertiary sources of repayment

Methodology

Through a series of practical exercises and examples, the program will take both the direct and indirect cash flow formats used throughout the U.S. and international markets and apply these formats to real life business banking cases to determine the credit risks in the lending decision.

The program will also use the cash flow statement to answer the most important questions in cash flow lending: why companies borrow and how they repay. The program will also illustrate how analysis of the cash flow statement can be effectively incorporated into the bank’s credit proposal.

Loan Structuring Fundamentals and Applications

Business and Community Banking

Content

In this module participants will be introduced to the different types of loan structures which make up the profile of the liability side of a borrower’s balance sheet. Particular emphasis will be placed on how the financing needs arise for, how different structures are derived from, and how risks are managed in the following types of loans:

• Seasonal working capital loans
• Permanent working capital loans
• Medium and long-term loans
• Subordinated and shareholder loans
• Bridge loans and refinancing alternatives

Selecting the most appropriate type of loan directly linked to the financing needs and asset class of the client in question will also be extensively examined.

Finally, the module will focus on the role of loan covenants in helping support and reinforce the hallmarks of good loan and capital structure.

Methodology

Using real life case examples, participants will review the fundamental disciplines of sound loan structuring, and in particular how the bank can design loan structures which safely identify and protect the primary and secondary sources of repayment of the loan.

The program will also show how the bank’s loan structuring solutions both meet the client’s immediate borrowing, liquidity, and long-term financial objectives while effectively managing the risk for the bank.

Early Warning Sign Analysis

Business and Community Banking

Content

This program provides participants with a comprehensive overview of early warning sign analysis, together with a road map of the proactive steps to be taken by a bank in limiting downside risk when a credit begins to deteriorate.

In addition, the rights of the bank in managing deteriorating credits will be closely examined together with effective strategies for managing such situations prior to filing for bankruptcy.

• Warning Sign Identification: Proactive financial analysis in helping forecast how warning signs can lead to financial deterioration and loss of value
• Identifying Management’s Weakness: Identification of financial analytical skills needed to uncover management weakness, with a particular emphasis on steps management needs to take to remedy operationally and financially a deteriorating situation
• Proactive Risk Management of Early Warning Signs: Review of the legitimate steps which the bank can require the borrower to take to avoid further financial deterioration
• Restructuring Techniques in Managing Deteriorating Credits: With an emphasis on how such restructuring steps are incorporated into loan and security documentation
• Value Creation Strategies: Strategies to be adopted as a company emerges from a workout scenario highlighting how the bank’s recommendations bring value to the company’s owners

Methodology

Using practical examples within the bank, the program will reinforce the risk management culture within your bank when addressing how to handle a deteriorating credit.

Specific techniques for risk management will be reviewed together with an examination of first, your bank’s role as a creditor when the loss of principal becomes a distinct possibility, and, second, in a consensual workout, developing appropriate value creation strategies for both the client and the bank.

Business Risk & Financial Statement Analysis

Corporate and Commercial Banking

Content

This program is designed to give participants an overview of the key risk considerations underpinning the operating performance of any business, and the key financial measurements from the income statement and balance sheet which measure the Company’s operating and financial performance.

• Business Drivers: Identification of key business drivers in manufacturers, wholesalers, distributors and service industries
• Business Risks: Evaluation of business risks including cyclicality, seasonality and different revenue and cost structures
• Competitive Environment: Analysis of market and competitive influences, and in particular a business’s own competitive advantage
• Supply Chain Management: Analysis of customer and supplier drivers in a business’s own overall industry
• Management Ability: Assessment and measurement of management’s competence in managing for risk, and the shareholders’ support in an economic downturn
• Income Statement Cash Flow Drivers: Identification and analysis of key cash flow drivers from the income statement: revenue growth, gross margin, EBITDA margin, and net margin
• Balance Sheet Cash Flow Drivers: Identification and analysis of key cash flow drivers from the balance sheet: receivables collection, inventory turnover, accounts payable days outstanding, and fixed asset turnover ratio analysis
• Capital Structure: Identification and analysis of key liquidity and leverage metrics from the balance sheet: current ratio, quick ratio, working capital, debt/equity and debt/EBITDA

Methodology

Using case examples taken from the automotive, airline, mining, steel, pulp and paper, technology, pharmaceutical, healthcare, defense, wholesaling, and service industries, the program will comprise a series of group exercises aimed at evaluating and articulating their respective business risks.

The program will also provide a framework for calculating and analyzing the key financial measurements used by banks in determining the operating and financial risks of the company.

Cash Flow Analysis I: Working Capital Analysis and Cash Flow

Corporate and Commercial Banking

Content

An introduction to basic cash flow analysis and forecasting skills with a focus on the following key disciplines:

• Cash Flow Construction: Introduction to the cash flow statement and how it is derived from the income statement and the balance sheet
• Cash Flow Analysis: Review of how the cash flow statement identifies the key operating, investing, and financing decisions taken by the borrower
• Impact of Working Capital on Cash Flow: Analysis of working capital movements and their relative impact on the cash flow statement highlighting the difference between cash flow and reported earnings
• Cash Flow and Management Evaluation: Examination of your bank’s cash flow statement and how it is used to determine first, a company’s debt servicing capability, and, second, the risks facing the company in the future
• Cash Flow Forecasting: Analysis of the cash flow statement as a vehicle for forecasting the company’s performance
• Cash Flow and the Role of Bank Debt: Development of techniques for highlighting the role of bank debt in a borrower’s cash flow cycle with a particular emphasis on why it is borrowed and how it will be repaid

Methodology

Taking both the direct and indirect cash flow formats used in U.S. banking, the program will examine these formats and apply them to real life corporate and commercial banking examples to help participants identify the credit risks in the lending decision.

These cases will emphasize the importance of the cash flow statement in highlighting the shortcomings of income statement and balance sheet analysis alone, and underpin the criticality of using a cash flow statement to identify the company’s capacity for sustainable debt service capability.

Finally, the program will also show why companies borrow, how they repay, as well as how the cash flow statement can be effectively incorporated into writing the bank’s internal credit proposal.

Cash Flow Analysis II: Cash Flow and Debt Capacity

Corporate and Commercial Banking

Content

An introduction to the role of cash flow analysis in client relationships in general, and the delivery of your bank’s financing solutions in particular:

• Drivers of Capital Structure: revenues, asset levels, return measurements and financing needs
• Deployment and Allocation of Capital: the purpose of loans, and the alternative sources of repayment
• Cash Flow Value Drivers: Income statement and balance sheet analysis: identification of key cash flow value drivers
• Debt Capacity: Cash flow and debt capacity: determination of how much bank debt a borrower can safely service and repay in a timeframe acceptable to the bank
• Forecasting and Break Even Analysis: How projected cash flows are forecasted, with a particular emphasis on using debt capacity to determine appropriate stress tests and downside scenarios
• Cash Flow and Capital Structure: The application of cash flow and debt capacity techniques in enabling bankers to arrive at appropriate loan and capital structuring techniques in ensuring the long-term sustainability of a company’s ability to service and repay debt

Methodology

Taking both the direct and indirect cash flow formats used in U.S. banking, the program will examine these formats and apply them to real life corporate and commercial banking examples to help participants identify the credit risks in the lending decision.

These cases will emphasize the importance of the cash flow statement in highlighting the shortcomings of income statement and balance sheet analysis alone, and underpin the criticality of using a cash flow statement to identify the company’s capacity for sustainable debt service capability.

Finally, the program will also show why companies borrow, how they repay, as well as how the cash flow statement can be effectively incorporated into writing the bank’s internal credit proposal.

Loan Structuring Fundamentals and Applications

Corporate and Commercial Banking

Content

In this module participants will be introduced to the different types of loan structures which make up the profile of the liability side of a borrower’s balance sheet. Particular emphasis will be placed on how the financing needs arise for, how different structures are derived from, and how risks are managed in the following types of loans:

• Seasonal working capital loans
• Permanent working capital loans
• Medium and long-term loans
• Subordinated and shareholder loans
• Bridge loans and refinancing alternatives

Methodology

Using real life case examples, participants will review the fundamental disciplines of sound loan structuring, and in particular how the bank can design loan structures which safely identify and protect the primary and secondary sources of repayment of the loan.

The program will also show how the bank’s loan structuring solutions both meet the client’s immediate borrowing, liquidity, and long-term financial objectives while effectively managing the risk for the bank.

Risk Analysis in Transaction and Deal Structuring

Corporate and Commercial Banking

Content

A tactical application program which builds on the techniques developed in the Cash Flow I, Cash Flow II, and Loan Structuring Fundamentals and Applications programs, providing participants with the application of these skills in the more challenging environment of balance sheet recapitalizations, acquisitions and other forms of transfer of ownership in privately held companies. Particular emphasis will be placed on the following key disciplines in the architecture and engineering of such deals:

• Rate of Return Measurements: Identification of the return objectives of capital providers
• Cash Flow Returns on Transactions: Quantification and determination of the borrower’s cash flow, debt capacity and its optimal capital structure
• Borrowing Structures: Identification of appropriate borrowing vehicles in acquisition financing, with an emphasis on the appropriate use of special purpose vehicles
• Holding Company vs. Operating Company Lending: The use of holding company vs. operating company structures, the merits and risks in such deals, and the implications of structural vs. contractual subordination
• Intercreditor Issues: Examination of intercreditor considerations between senior and subordinated debt, between debt and equity, and how such considerations impact the senior lender
• Loan and Transaction Documentation: Optimal covenant structures in acquisition and recapitalization financing, with a particular emphasis on considerations arising in covenant-lite deals

Methodology

Assuming a basic knowledge of loan structuring (see Loan Structuring Fundamentals and Applications Program), the program is designed to offer more sophisticated insights into the disciplines of loan, transaction, and deal structuring and the skills demanded of relationship managers, credit officers, and structured financiers.

Using real life transactions reflecting transfer of ownership scenarios among middle market companies, participants will be asked to play the role of the banker as financial architect and financial engineer in defining how the loan in general, and the capital structure in particular, will be implemented.

Mindset of the Business Owner I: Value and Creation Strategies

Corporate and Commercial Banking

Content

Designed for the more experienced corporate and commercial banker dealing with the strategic issues confronting the private company owner and/or CEO, the program provides a framework for:

• The Client’s Business Agenda: Understanding and defining the key priorities for the business owner and the CEO
• Corporate Finance Planning: Business opportunity identification which positions the bank to provide both commercial banking and corporate finance solutions to the client
• Value Creation Strategies: Developing techniques to review the client’s past capital and asset allocation decisions and help identify opportunities ranging from improved working capital management to improved operating margin performance so as to create additional value for the privately held business
• Financial Architecture and Engineering: Optimal capital structuring using cash flow and debt capacity techniques to determine the optimal levels of debt required to enable the client to achieve their corporate finance goals and objectives
• Relationship Planning: Developing conversational skills to help the client anticipate liquidity and refinancing risks and how the bank can offer corporate banking and corporate finance solutions to manage such refinancing risks

Methodology

Using typical case profiles of a corporate and commercial banking client, the program enables participants to review the critical disciplines of corporate finance when dealing with the most important priorities on a CEO or business owner’s agenda.

The program provides the participants with a conversational, yet sufficiently detailed understanding of the key principles which underlie corporate valuation, change of ownership, sources of capital and capital structure, and how these principles can be integrated seamlessly to form the basis of a value creation discussion with the business owner.

Mindset of the Business Owner II: Transfer of Ownership and Succession Planning

Corporate and Commercial Banking

Content

Building on the disciplines of Mindset of the Business Owner I, this program focuses first on the technical skills required to support an in-depth value creation discussion with the client, with a particular focus on corporate finance valuation techniques. In particular:

• Net Present Value and Internal Rates of Return: With a particular emphasis on how these techniques are used by private equity investors and financial buyers to ascertain the minimum required returns on investment
• Discounted Cash Flow Analysis: computation of free cash flow and how this differs from cash flow computations used in the lending decision
• Weighted Average Cost of Capital (WACC): How this is computed for privately held and publicly traded companies and used as a discount rate to assist in the determination of corporate value
• Terminal or Residual Value: Reviewing the different techniques for this calculation using perpetuity valuation methodology or exit multiple approaches
• Multiple Analysis: Transaction and comparable company multiple analysis and how this is employed as a legitimate, practical alternative to DCF analysis

Methodology

Using real life examples, the program provides an introduction to the role of corporate valuation, and in particular how this is used by relationship managers in fostering and developing client relationships.

Participants will review the theory underpinning such concepts as free cash flow, WACC and terminal value and will see how such valuation techniques can be successfully and seamlessly integrated into a case example which applies these principles in practice.

Most important, the program will show how sound lending practices, combined with sensible practical application of well considered valuation techniques, can help clients avoid overpaying for businesses and ultimately overfinancing the purchase.

Interest Rate and FX Derivatives

Corporate and Commercial Banking

Content

This program provides participants with an overview of how the corporate and commercial banker can provide interest rate and FX hedging solutions to their clients in a responsible risk-controlled manner with a particular emphasis on:

• Interest Rate and FX Exposures: Identification of the client’s exposure to movements in interest rates and FX rates and how such movements can adversely affect the cash flows of the company
• Interest Rate and FX Options: An examination of how the options family in general, and caps, floors, and collars in particular are used to help manage interest rate and FX risk
• Futures, Forwards, and Swaps: A review of the building blocks of interest rate and FX swaps and how these provide a low-cost alternative to hedging interest rate and FX risk
• Off-Market Hedging Alternatives: A review of hybrid solutions such as basis swaps, swaptions, forward starting swaps, and variable rate swaps enable the client to develop low cost alternatives to more conventional plain vanilla solutions
• Credit and Market Risk Exposures in Derivatives: An examination of how credit risk and market risk arise in derivatives products and how these risks are managed internally by the bank
• ISDA Documentation: An in-depth review of the ISDA agreement, how this agreement helps manage the risks in derivatives for the bank, and how banks customize such agreements to conform to their risk management objective

Methodology

Using practical examples and a series of exercises and cases, participants will review both market practices in how derivatives are used by corporate and commercial banking clients today.

The program will also highlight the profitability of such instruments from the bank’s perspective, and how such financial tools can be responsibly used to manage the risk of a client’s business from both the client and the bank’s perspective.

Early Warning Signs

Corporate and Commercial Banking

Content

This program provides participants with a comprehensive overview of early warning sign analysis, together with a road map of the proactive steps to be taken by a bank in limiting downside risk when a credit begins to deteriorate.

In addition, the rights of the bank in managing deteriorating credits will be closely examined together with effective strategies for managing such situations prior to filing for bankruptcy.

• Warning Sign Identification: Proactive financial analysis in helping forecast how warning signs can lead to financial deterioration and loss of value
• Identifying Management’s Weakness: Identification of financial analytical skills needed to uncover management weakness, with a particular emphasis on steps management needs to take to remedy operationally and financially a deteriorating situation
• Proactive Risk Management of Early Warning Signs: Review of the legitimate steps which the bank can require the borrower to take to avoid further financial deterioration
• Restructuring Techniques in Managing Deteriorating Credits: With an emphasis on how such restructuring steps are incorporated into loan and security documentation
• Value Creation Strategies: Strategies to be adopted as a company emerges from a workout scenario highlighting how the bank’s recommendations bring value to the company’s owners

Methodology

Using practical examples within the bank, the program will reinforce the risk management culture within your bank when addressing how to handle a deteriorating credit.

Specific techniques for risk management will be reviewed together with an examination of first, your bank’s role as a creditor when the loss of principal becomes a distinct possibility, and, second, in a consensual workout, developing appropriate value creation strategies for both the client and the bank.

Risk Analysis in Trade Finance

Corporate and Commercial Banking

Content

The program combines the disciplines of identifying the key risks which underpin the full range of international trade finance transactions underwritten by banks today.

The program enables participants to consider the different types of risk arising from (1) supply chain financing, (2) pre and post shipment loans, (3) import and export finance, (4) letters of credit transactions, and, (5) bid and performance bonds.

Reviewing each of these trade financing opportunities, the program will examine the following key risks:

• Counterparty Risk in Letters of Credit: Where credit risk arises from the opening and the advising and confirming bank’s perspective.
• Country Risk: the identification and importance of country risk in assessing international trade deals.
• Insurance and Reinsurance Risk: the role of government agencies and private insurance companies in mitigating the risk in international trade.
• Operational and Settlement Risk: the importance of identifying and controlling operational risk in both domestic and cross border trade transactions.
• Legal and Documentation Risk: the importance and role of accurate documentation in supporting international trade deals in order to protect the reputation of the bank.

Methodology

The program uses short cases from the bank’s product expertise and capability in trade finance, with a particular focus on supply chain financing solution, customer and supplier payment flows, import and export letters of credit, the use of standby letters of credit in bid, performance, and advance payment transactions, and the different techniques for developing both pre and post shipment financing.

The Role of Risk Analysis in Corporate Finance

Investment and International Banking

Content

The program will focus on the role of the principle themes of cash flow analysis and debt capacity in calibrating the importance of the credit underwriting decision in helping frame the bank’s corporate finance strategy with its investment and international banking clients, with a particular emphasis on:

• Financial Statement and Early Warning Sign Analysis: a review of the financial statements – income statements and balance sheets - of corporate borrowers with the key objective of identifying early warning signs both for lender and shareholder.
• Leverage and Liquidity Analysis: a review of the refinancing risk embedded in the liquidity of corporate borrowers – short term vs. long term – and the leverage as reflected in refinancing through debt or equity.
• Sustainable Earnings and Cash Flow Analysis: a review of the techniques used by the bank’s Credit Risk Department in assessing the sustainable cash flows of a corporate borrower’s business and the bank’s approach to evaluating and analyzing cash flow statements.
• Capital Structure and Debt Capacity Analysis: a review of the techniques used both internally within the bank and externally by the markets – such as rating agencies – in assessing a company’s ability to service and repay its debt.
• Role of Enterprise Value in Credit Analysis: an examination of the interrelationship between enhanced Enterprise Value and the reduction of risk and reduced Enterprise Value and the increase of risk as a result of increased or reduced corporate cash flows respectively.

Methodology

Assuming a baseline grasp of accounting and financial statement analysis skills, the program will, using practical case examples, will develop the themes of cash flow, debt capacity, working capital analysis and value creation to highlight how management capital allocation decisions can increase or reduce the risk of a borrower while simultaneously reducing or increasing its value to its shareholders.

The program will also highlight how a leading investment and international bank can work with companies to develop restructuring strategies which reduce credit risk and correspondingly increase corporate value.

Risk Analysis in Transaction and Deal Structuring

Investment and International Banking

Content

Building on the disciplines established in the Role of Risk Analysis in Corporate Finance, this program provides an in-depth review of the techniques used by investment and international banks in applying discounted cash flow analysis and comparable multiple valuation techniques in arriving at corporate value. In particular:

• Net Present Value and Internal Rates of Return: With a particular emphasis on how these techniques are used by private equity investors and financial buyers to ascertain the minimum required returns on investment
• Discounted Cash Flow Analysis: computation of free cash flow and how this differs from cash flow computations used in the lending decision
• Weighted Average Cost of Capital (WACC): How this is computed for privately held and publicly traded companies and used as a discount rate to assist in the determination of corporate value
• Terminal or Residual Value: Reviewing the different techniques for this calculation using perpetuity valuation methodology or exit multiple approaches
• Multiple Analysis: Transaction and comparable company multiple analysis and how this is employed as a legitimate, practical alternative to DCF analysis
• Economic Profit Models: a review of various economic value added and economic profit techniques to help identify and evaluate the pitfalls of overpaying for and overfinancing the purchase of acquisition targets.

Methodology

Following a brief overview of the theoretical building blocks of discounted cash flow valuation techniques, the program will use practical case examples to enable participants to value companies from the perspective of sellers on the one hand, and both financial and strategic buyers on the other.

Most importantly, examples will include opportunities not just to value a company, but also determine the purchase price which should be paid in order to ensure that the buyer creates value for its own investors and thus avoid the pitfalls of overpayment.

The Role of Corporate Valuation in the Underwriting Decision

Investment and International Banking

Content

Building on the disciplines established in the Role of Risk Analysis in Corporate Finance, this program provides an in-depth review of the techniques used by investment and international banks in applying discounted cash flow analysis and comparable multiple valuation techniques in arriving at corporate value. In particular:

• Net Present Value and Internal Rates of Return: With a particular emphasis on how these techniques are used by private equity investors and financial buyers to ascertain the minimum required returns on investment
• Discounted Cash Flow Analysis: computation of free cash flow and how this differs from cash flow computations used in the lending decision
• Weighted Average Cost of Capital (WACC): How this is computed for privately held and publicly traded companies and used as a discount rate to assist in the determination of corporate value
• Terminal or Residual Value: Reviewing the different techniques for this calculation using perpetuity valuation methodology or exit multiple approaches
• Multiple Analysis: Transaction and comparable company multiple analysis and how this is employed as a legitimate, practical alternative to DCF analysis
• Economic Profit Models: a review of various economic value added and economic profit techniques to help identify and evaluate the pitfalls of overpaying for and overfinancing the purchase of acquisition targets.

Methodology

Following a brief overview of the theoretical building blocks of discounted cash flow valuation techniques, the program will use practical case examples to enable participants to value companies from the perspective of sellers on the one hand, and both financial and strategic buyers on the other.

Most importantly, examples will include opportunities not just to value a company, but also determine the purchase price which should be paid in order to ensure that the buyer creates value for its own investors and thus avoid the pitfalls of overpayment.

Mindset of the CEO I: Value Creation Strategies

Investment and International Banking

Content

Designed for the more experienced investment and international banker dealing with the strategic issues confronting both public and large private company CEOs and CFOs, the program provides a framework for:

• The Business Agenda: Understanding and defining the key priorities for the CEO and the CFO using both qualitative and quantitative metrics specific to public and private companies
• Corporate Finance Relationship Planning: Positioning the bank as the provider of both investment and corporate banking solutions which enable the CEO and CFO to achieve their qualitative and quantitative objectives
• Business and Financial Strategy Setting: Positioning the investment and international banker’s role as a business strategist first, banker second so as to ensure that the CEO and CFO use the banker as their trusted financial and business advisor ahead of all others
• Financial Architect: Positioning of the investment and international banker as the effective financial architect of the client’s capital structure in designing an optimal structure of debt an equity to help finance the client’s long term business strategy at the optimal cost
• Engineering the Capital Structure: Developing the skills required to seamlessly integrate the bank’s capital raising solutions to ensure the appropriate blend between senior and junior debt and between debt and equity

Methodology

Using actual case examples taken from the market or specific to the bank, the program will work through profiles which enable participants to use the skills of cash flow, deal structuring, and valuation analysis which position the bank to be the trusted advisor and capital provider of choice.

The program will also serve as a platform to enable participants to identify real life clients to whom such techniques can be applied on a day to day basis.

Mindset of the CEO II Acquisition Financing and Leveraged Buyouts

Investment and International Banking

Content

The program develops a framework to assist investment and international bankers in analyzing the opportunities for acquisition financing in general, and leveraged buyouts in particular, by covering:

• Acquisition Financing Framework: A review of the engineering methodology by which both public and private companies are bought and sold
• Review of Buyer and Seller Motivations: The drivers and priorities of both buyers and sellers in acquisition financing
• Analysis of Strategic vs. Financial Buyers: A comparison of both the short and long term operating and financial return objectives of both groups of buyers and the impact of such objectives on the acquisition purchase price
• Leveraged Buyouts (LBOs) Framework: A step by step approach of the financial engineering required to take a public company private
• LBOs: The players, the role of the financial sponsor, the role of subordinated or mezzanine debt
• Acquisition Financing: The role of bank debt with an emphasis on the application of debt capacity techniques to determine the appropriate levels of senior debt in the pro forma structure
• Capital Structure: Developing an appropriate capital structure enabling investors to achieve acceptable returns within the bank’s risk appetite as lender

Methodology

Using practical examples taken from the public markets, participants will combine the use of corporate valuation, cash flow analysis, debt capacity, and transaction structuring techniques to help design and engineer acquisition financing opportunities seen through the eyes of a CEO and CFO.

The program will deconstruct each transaction starting with deal motivation and work through the various building blocks used by experienced acquisition financiers in arriving at holistic acquisition financing solutions which meet the corporate finance objectives of the client while conforming to the highest underwriting standards of the bank.

Risk Analysis and Value Creation Strategies in Financial Institutions

Investment and International Banking

Content

This program introduces participants to the role of risk analysis of financial institutions in general, and commercial and investment banks in particular, with a focus on:

• Financial Profile of Commercial and Investment Banks: The income statement and balance sheets of both commercial and investment banks compare and contrast to those of manufacturing and distribution companies
• Capital Adequacy: Importance of capital adequacy and how it is measured and applied in different international and domestic regulatory requirements, focusing on the key financial measurements used in today’s marketplace
• Earnings Sustainability: A review of the key financial income statement ratios and techniques for measuring earnings sustainability in commercial and investment banks how such techniques can be used to exaggerate earnings or conceal losses
• Liquidity and Funding: Focusing on the various sources of funding for commercial and investment banks, gap analysis, and the asset and liability management at such institutions
• Asset Quality: Measurements for assessing a commercial bank’s asset quality with a focus on techniques to analyze its loan book and investment bank’s asset quality with a focus on its investments in marketable securities, traded assets, derivatives assets, and equity investments
• Market Valuation Techniques: Introduction to the way equity markets value both commercial and investment banks with an emphasis on income statement and balance sheet multiples and how such techniques can be employed by financial counterparties in identifying warning signs

Methodology

Using real life case examples taken from the public markets, participants will review their bank’s role as a counterparty to U.S., European, and emerging markets commercial and investment banks.

The program will focus on recent regulatory and accounting developments in the financial services industry while at the same time provide the participants with a fully integrated model for assessing the risks inherent in doing business with commercial and investment banks.

Risk Analysis in Trade Finance

Investment and International Banking

Content

The program combines the disciplines of identifying the key risks which underpin the full range of international trade finance transactions underwritten by banks today.

The program enables participants to consider the different types of risk arising from (1) supply chain financing, (2) pre and post shipment loans, (3) import and export finance, (4) letters of credit transactions, and, (5) bid and performance bonds.

• Counterparty Risk in Letters of Credit: Where credit risk arises from the opening and the advising and confirming bank’s perspective.
• Country Risk: the identification and importance of country risk in assessing international trade deals.
• Insurance and Reinsurance Risk: the role of government agencies and private insurance companies in mitigating the risk in international trade.
• Operational and Settlement Risk: the importance of identifying and controlling operational risk in both domestic and cross border trade transactions.
• Legal and Documentation Risk: the importance and role of accurate documentation in supporting international trade deals in order to protect the reputation of the bank.

Methodology

The program uses short cases from the bank’s product expertise and capability in trade finance, with a particular focus on supply chain financing solution, customer and supplier payment flows, import and export letters of credit, the use of standby letters of credit in bid, performance, and advance payment transactions, and the different techniques for developing both pre and post shipment financing.

Controlling the Risks of Complex Transactions

Investment and International Banking

Content

The program combines the disciplines of identifying, through a combination of healthy curiosity and commercial skepticism, the key risks which underpin the full range of transactions underwritten by investment and international banks today.

The program enables participants to consider the different types of risk arising from a full range of transactions – loan underwriting, interest rate risk management, structured notes, exotic derivatives, debt and equity capital markets, and global trade finance.

• Leveraged Transactions: A review of aggressive use of recapitalization strategies in leveraged deals today,
• Credit and Market Risk in Derivatives: How credit risk arises in interest rate risk management products and the right and the wrong way to control these,
• Special Purchase Vehicle (SPVs): Deconstruction and identification of inappropriate use of SPVs and securitization techniques,
• Off-Balance Sheet Techniques for Increasing Leverage: Use of leverage in structured notes products and determination of appropriateness thereof,
• Regulatory, Tax and Accounting Arbitrage: Inappropriate use of structured products for regulatory, tax, and accounting arbitrage
• Income Statement and Balance Sheet Manipulation Techniques: Use of structured products in general, and options in particular, as a vehicle for boosting revenues and camouflaging losses.

Methodology

Using a wide range of practical case examples taken from both domestic and international capital markets, the program takes a holistic approach to risk management today, focusing on the identification and classification of the full range of risks confronted by bank executives: credit, market, operational, legal and compliance, and reputational and suitability.

Each of the cases challenges participants – once such risks have been identified and classified – to develop risk controlling strategies that protect the financial, regulatory, and reputational capital of the bank.