This international course on managing problem loans, debt restructuring and distressed loans consists of two separately bookable modules:

1. Managing Problem Loans
2. Debt Restructuring and Distressed Loans

Who Should Attend?

• Relationship managers
• Corporate bankers
• Credit and Loan professionals
• Risk managers
• Project and Trade finance professionals

Course Materials

You will receive comprehensive course notes and materials so that you may refer back to these materials for future reference.

Certificate of Completion

Upon completion of this course, you will receive a Certificate of Completion, a recognition of your accomplishment, skills and knowledge learned from this course.

Course Methodology

A combination of lectures, examples, case studies and discussions

Course Contents

Module 1: Managing Problem Loans

Day One

Session 1: Assessing the Corporate's financial position using historical

• Information
• Bank account activity
• DuPont analysis
• Altman Z scores
• Segmentation Analysis
• Ratio Analysis
• Benchmarking

Session 2: Case Study on Assessing Financial Position

Session 3: Assessing the Borrower's Vulnerability to factors in its own Industry

• Cyclicality risk; Profitability risk; Maturity risk; Dependence risk; Operating risk; Regulatory risk; Porter's Five Forces of Competition
• Case Study

Session 4: Assessing the Borrower's Vulnerability to factors in its Suppliers'/Customers' Industry

 Commodity prices; Foreign Exchange rates; Interest rates; Availability of finance; Foreign competition

Session 5: How Collateral Performs in a Downturn

• Real Estate; Accounts Receivable; Inventory; Plant and Equipment; Stock Market; Securities; Fixed Income securities; Subsidiary companies.
• Guarantee structures

Day Two

Session 1: Financial Forecasting using Excel

• Creating Base Case/ Best Case/ Worst Case scenarios based upon a range of variables from the customer's own industry and those of his suppliers/ customers
• Using Excel to sensitise the forecasts: single and two-variable data tables;
• Scenario Manager; Scroll Bar; Command Button; Trend Forecast Method

Session 2: Development of Action Plans

• Identifying which group the corporate fits into: "Business as Usual”; Watchlist"; Special Control
• Seeking additional security
• Seeking partial repayment
• Improving financial covenants
• Improving financial information quality and timeliness
• Seeking improved pricing

Session 3: Case Study: Delegates develop Action Plans for six corporates

Session 4: Overview of Loan Workouts and Restructuring

• Lessons from experience: including Gypsum Wallboard Plants; Hotels;
• Restaurant Chains; Leisure Facilities; Modular Housing
• Introduction to the loan workout process

Session 5: Initial Analysis

• Use of Liquidation Models to assess each stakeholder's economic interest and how the pain should be shared
• Overview of UK Restructuring/ Insolvency priorities to assist with this process
• Short Case Studies: (i) Leveraged situation, (ii) Industrial group
• Exercise: Delegates produce their own Liquidation Model for a core company and make team presentations on what their solution would be/ negotiating style

Day Three

Session 1: Restructuring the balance sheet of a highly leveraged company

• Case Study: Participants will attempt to restructure the company's balance sheet and propose Heads of Terms. Debrief will include Restructuring Terms
• Sheets, Rationale and actal outcome.

Session 2: Risk and Reward in Workout Cases

• Constructive criticism of the returns achieved in "Highly Leveraged"case
• Imposing a RAROC structure on workout pricing; Reward techniques Including the use of: Increased interest rate; Part cash pay interest/ part PIK; Restructuring
• fees; Success fees, and how to tie these to company's ability to pay; Warrants;
• Convertible term loans; Debt-Equity swaps
• Case Study: Review of the terms of a Listed company's workout

Session 3: A Distressed Project Company

• Identification of causes of financial distress; How can the causes be addressed?; What will it take for the faciliy to become economically viable?;
• Who has the economic interest?
• Use of Debt-Equity swaps; Nuisance power of shareholders; How the takeover was structured; What should workout bankers do now?

Session 4: Multi-Creditor Workouts

• An Overview of The London Approach/ The Thai Approach; Steering Committees Debt Moratoria;
• Case Study: Negotiation/ nuisance power of various stakeholders at a large
• Industrial Group and how these influenced the eventual outcome

Session 5: Assessing whether to sell the asset

• Using the case study of a troubled hotel, Delegates develop a framework for considering an offer's acceptability:
• Identification of causes of financial distress; How can the causes be addressed? Using consultants' reports; What will it take for the hotel to become economically viable? Who has the economic interest?; Take the offer or fund investment in the hope of realising higher value in future?;
• What value can the Distressed Debt investor achieve?

Module 2: Debt Restructuring and Distressed Loans

Day Four

The Credit Crunch, which has been in full swing since the summer of 2007, has exacerbated financial stresses within a wide range of industry sectors. Many analysts, the Ratings Agencies included, suggest that corporate default rates have picked up significantly such that we are likely to see a minimum 6% default rate this year in leveraged loans - in 2009, the momentum suggests that the rate could approach double figures. The Chancellor of the Exchequer has indicated that the UK could well be facing the most difficult economic circumstances of the past 60 years - and this period includes the secondary banking crisis of the early 1970s, the deep restructuring issues of the mid- 1980s and the deep recession of 1989-92 which led to Sterling's withdrawal from the EMU!

These factors mean that corporate lenders need to enhance their corporate debt restructuring skills. This course is suitable for senior managers and director’s relationship, credit and loan workout roles.

Overview of Corporate Debt Restructuring

Lessons from experience: including Construction Materials; Hotels;

Franchised Restaurant Chain; Leisure Resorts; Modular Housing, and Long

• Distance Bus Operators
• Introduction to the loan workout process Initial Analysis
• Use of Liquidation Models to assess each stakeholder's economic interest and how the pain should be shared
• Overview of UK Restructuring/ Insolvency priorities to assist with this process
• Short Case Studies: (i) U.S. Leveraged situation, (ii) European industrial group
• Exercise: Delegates produce their own Liquidation Model for a core company and make team presentations on what their solution would be/negotiating style

Restructuring the balance sheet of a company in default

• Case Study: Participants will attempt to restructure the company's balance
• Sheet and propose Heads of Terms. Debrief will include Restructuring Terms
• Sheets, Rationale and actal outcome.

Risk and Reward in Workout Cases

• Constructive criticism of the returns achieved in B2B case
• Imposing a RAROC structure on workout pricing
• Reward techniques Including the use of:Increased interest rate; Part cash pay interest/ part PIK; Restructuring fees; Success fees, and how to tie these to company's ability to pay; Warrants, and Convertible term loans
• Case Study: Review of the terms of a UK Listed company's workout

Multi-Creditor Workouts

• An Overview of The London Approach
• Steering Committees
• Debt Moratoria
• Case Study: Negotiation/ nuisance power of various stakeholders at a large European Industrial Group and how these influenced the eventual outcome

Day Five

Debt-Equity Swaps

• When are these a viable solution?
• What are the practical implications?
• Negotiating power of shareholders
• Directors' and Lenders' Liability issues
• Case Study: UK-Listed company Debt-Equity swap; review of the terms of the deal, analysis of why it was structured in this way; What should
• Workout bankers do now?

How to Achieve an Appropriate Risk-Reward Balance in Restructured

Loans (Corporate)

Liquidation Model Analysis

• To establish who has the economic interest/ who is the "fulcrum" stakeholder
• Short Case Study: European automotive component supplier
• Exercise: UK retailer - delegates are asked to complete a Liquidation Model

Overview of a typical restructured problem loan

• Short Case Study: UK B2B courier
• Exercise: Course Director-led discussion on strengths and weaknesses of the restructuring.
• Debrief in the light of changing levels of "Expected Loss" and Risk Adjusted
• Return on Capital ("RAROC")

Overview of Potential Revenue Sources

• Cash Pay Interest; Pay-in-Kind Interest; Restructuring Fees; Warrants;
• Convertible structures, and Debt-for-Equity Swaps
• Short Case Studies: the actual structures negotiated by the bank for: retailer; Biodiesel producer; Automotive components producer
• Exercise: Delegates are asked to design a rewards structure for a workout case

How to Evaluate Offers for Distressed Loans (Corporate)

Valuation Techniques

• DCF/ NPV approaches
• Selecting an appropriate discount rate: calculating WACC; use of CAPM
• Terminal Values: use of perpetual growth models
• Comparable Companies multiples
• Comparable transactions multiples

Case Study: "Hotel in distress: should we take the bidder's offer or invest and hold"?

• Identification of causes of financial distress
• How can the causes be addressed?
• Using consultants' reports
• Economic viability
• Liquidation Model Analysis
• Take the offer or invest in refurbishment with the hope of a higher risk adjusted return in the future
• Distressed debt investor's perspective
• Tax issues
• Risk Adjustments

A Framework for Considering Offers

• Delegates develop a framework for risk-adjusted return decisions in the workout arena, following on from debrief of the Case Study
• Delegates will then apply the model to the case of a UK Retailer