A pragmatist's guide to leveraged finance : credit analysis for below-investment-grade bonds and loans / Robert S. Kricheff.

Format:

Book

Author/Creator:

Kricheff, Robert S., author.

Language:

English

Subjects (All):

Investments--Management.

Investments.

Junk bonds.

Financial leverage.

Physical Description:

1 online resource (246 pages)

Edition:

Second edition.

Place of Publication:

La Vergne : Harriman House, 2021.

Summary:

The high-yield leveraged bond and loan market is now valued at $4+ trillion in North America, Europe, and emerging markets. What's more the market is in a period of significant growth.To successfully issue, evaluate, and invest in high-yield debt, financial professionals need credit and bond analysis skills specific to these instruments. This fully revised and updated edition of A Pragmatist's Guide to Leveraged Finance is a complete, practical, and expert tutorial and reference book covering all facets of modern leveraged finance analysis. Long-time professional in the field, Bob Kricheff, explains why conventional analysis techniques are inadequate for leveraged instruments, clearly defines the unique challenges sellers and buyers face, walks step-by-step through deriving essential data for pricing and decision-making, and demonstrates how to apply it. Using practical examples, sample documents, Excel worksheets, and graphs, Kricheff covers all this, and much more: yields, spreads, and total return; ratio analysis of liquidity and asset value; business trend analysis; modeling and scenarios; potential interest rate impacts; evaluating leveraged finance covenants; how to assess equity (and why it matters); investing on news and events; early-stage credit; bankruptcy analysis and creating accurate credit snapshots. This second edition includes new sections on fallen angels, environmental, social and governance (ESG) investment considerations, interaction with portfolio managers, CLOs, new issues, and data science. A Pragmatist's Guide to Leveraged Finance is an indispensable resource for all investment and underwriting professionals, money managers, consultants, accountants, advisors, and lawyers working in leveraged finance. It also teaches credit analysis skills that will be valuable in analyzing a wide variety of higher-risk investments, including growth stocks.

Contents:

Intro

Contents

About the Author

Acknowledgments

Introduction

Defining the Market

How Companies Enter the Market

Unique Aspects of Leveraged Finance Credit Analysis

The Book

Closing Comment

Chapter 1: Common Leveraged Finance Terms and Trading Parlance

Definitions of General Terms

Duration, Spread, and Yield Definitions

A Pragmatic Comment on Yields, Prices, and Trading Terminology

Chapter 2: Defining the Market: Ratings Agencies and Indexes

The Credit Rating Agencies

Indexes

Chapter 3: The Participants

The Issuers

Private Equity

The Sell Side

The Buy Side

The Major Types of Investors in the Market

How Each Participant Operates in the Market

Chapter 4: Features of Bank Loans

Basic Types of Bank Loan

Bank Loan Structures

Covenants, Waivers, and Amendments

Chapter 5: Why Is Leveraged Finance Investment Analysis Unique?

Similarities to Equity

Similarities to Debt

Structural Issues

The Three Parts of Leveraged Finance Investment Analysis

Chapter 6: A Primer on Prices, Yields, and Spreads

The Basics

A Few Points on Yields

A Few Points on Spreads

Duration

Total Return Event Analysis

A Pragmatic Point on Terminology

A Pragmatic Point on Trading Bonds: Accrued Interest

Deferred Payment Bonds: Understanding Accretion

Chapter 7: Financial Issues: A Primer on Financial Statement Analysis

The Financial Statements

EBITDA

Adjusted EBITDA

Capital Expenditures

Interest Expense

Taxes

Changes in Working Capital

Free Cash Flow

The Balance Sheet

A Pragmatic Point on Financial Statements

Chapter 8: Financial Issues: Credit Ratios

Ratio Analysis

The Base Ratios.

EBITDA/Interest Ratio

Debt/EBITDA

Some Pragmatic Points on the Leverage Ratio

A Pragmatic Point on Valuations

FCF Ratios

A Pragmatic Point on FCF

Chapter 9: Financial Issues: Business Trend Analysis and Operational Ratios

Revenue and EBITDA Trends

Volatility of Operating Results

Margins and Expenses

Other Comments on Business Analysis

A Pragmatic Point about Companies Outside the Market

Chapter 10: Financial Issues: Expectations, Modeling, and Scenarios

Guidance and Forecast Construction

Revenue Modeling

EBITDA and Free Cash Flow Modeling

Debt Structure

Scenarios

A Pragmatic Point on Bank Maintenance Covenants and Expectations

Chapter 11: Structural Issues: Coupons

Loan Coupons

Bond Coupons

Deferred Pay Coupons, Zeros, and PIKs

How the Coupon Is Determined

Modeling Changes in Coupons

Chapter 12: Structural Issues: Maturities and Calls

Maturities

Calls

A Quick Review of YTC

Benefits of Call Options and Call Protection

Clawbacks

Ten-Percent Annual Call

Cash Flow Sweeps

Other Bank Prepayments

Open Market Repurchases

A Pragmatic Point on Early Debt Retirement

Chapter 13: Structural Issues: Ranking of Debt

Ranking

Structural Subordination

Subsidiary Guarantees

Chapter 14: Structural Issues: Covenants

Methods to Approach Covenant Analysis

Debt Incurrence

Defined Terms and Carve-Outs

Restricted Payments

Change of Control

Asset Sale

Reporting Requirements

Other Covenants

Affirmative (Maintenance) Covenants

Restricted and Unrestricted Subsidiaries

Chapter 15: Structural Issues: Amendments, Waivers, and Consents

The Process of Amending Terms.

Tenders and Exchanges

Distressed Exchange Offers

Some Examples

Chapter 16: Other Credit Factors: Ownership and Management

Ownership Considerations

Management Considerations

Chapter 17: Other Credit Factors: Environmental, Social and Governance Factors (ESG),Socially Responsible Investing (SRI), and Impact Investing

ESG

SRI

Impact Investing and Green Bonds

Engagement

A Few Pragmatic Points on ESG and SRI

Chapter 18: Other Credit Factors: Fallen Angels

Crossover Credits: Fallen Angels and Rising Stars

Special Considerations When Analyzing Fallen Angel Credits

Fallen Angels' Market Impact

Chapter 19: Other Credit Factors: Distressed Credits, Bankruptcy, and Distressed Exchanges

Distressed Credits

Default and Bankruptcy

Classes of Claims

Subordination

Claims Arising from Bankruptcy and DIPs

Valuing the Company

Sale or Restructuring

Restructuring without Bankruptcy

A Few Pragmatic Points on Bankruptcy Reorganizations and NPV

Chapter 20: Market Information: Why Does Equity Matter?

Valuation Based on Equity Markets

Monitoring Equities

Chapter 21: Market Information: Reacting to News Events

Scenario: The Issuer Makes an Acquisition

Scenario: The Issuer Gets Bought

Scenario: The Issuer Announces an IPO

Scenario: The Issuer Is Facing a Maturity

A Pragmatic Point on the Blended Price to Retire Debt

Chapter 22: Market Information: Relative Value Analysis

Varied Goals of Relative Value Analysis

Financial Ratios and Relative Value

Operational Ratios and Relative Value

Chapter 23: Investing Issues: Portfolio Management Interaction

Portfolio Types and Styles

Trading Liquidity and Portfolios.

Basics of Portfolio Performance Analysis

Chapter 24: Investing Issues: Collateralized Loan Obligations

CLO Basics

CLO Structures

How CLO Structures Impact an Analyst's Job

Chapter 25: Investing Issues: New Issuance

New-Issue Process

Pro Forma Adjustments

Supply and Demand Dynamics in the New-Issue Market

Chapter 26: Investing Issues: Preparing a Credit Snapshot

Prioritization

The Basics of a Credit Snapshot

Trends

Pro Forma

Example of a Snapshot

Chapter 27: Investing Issues: The Investment Decision Process

Varied Approaches to Investment Decisions

A Sample Investment Decision Process

Some Investment Traps

Chapter 28: Data Science and Credit Analysis

Queries and Databases

Regression

Probability and Decision Trees

Issues for Data Science and Credit Markets

Closing Comments

Publishing details.

Notes:

Includes index.

Description based on print version record.

ISBN:

9780857198501

0857198505