Seminar: Business valuation and credit analysis

July 7–9, 2005

What are the benefits?

This course concentrates on the practical aspects of corporate credit analysis and valuation. It examines the cash flow dynamics of a business, the liquidity issues facing the business and how they are measured by banks and rating agencies, how to analyze the business’ external and internal environment and how the financial performance of the firm is analyzed by banks and rating agencies. Numerous practical examples, exercises and real life case studies are used throughout the course.

Persons who will benefit most

1. Credit analysts, first and foremost;
2. Loan officers;
3. Distressed debt officers;
4. All those interacting with companies aiming for IPO, trade sale or private equity investment;
5. Risk management executives.

Day 1: Credit analysis

1. Types of financial institutions, their function and credit analysis criteria
   Case study: investment banks, sukuk and the Middle East
2. Risk analysis framework
   Case studies: risk analysis in project finance
3. Categorizing and analyzing risk
   Case study: the implications of Basle II for financial institution credit analysis
4. Sovereign risk
   Case study: sovereign risk analysis in the Middle East
5. Analyzing derivative credit risk
   Case study: financial institution misuse of derivatives — the Daiwa, Barings and recent Singapore examples

Day 2: Capital structure and financial institutions

1. Financial structure and financial institutions
   Case study: capital structure and financial performance
2. The role of rating agencies
   Case study: analyzing rating agency reports on financial institutions
3. Fund management
   Case study: arbitrage — the role of hedge funds
4. Advanced discounted cashflow valuation
   Exercise: Participants will study an overseas investment by a U.S. technology company from the DCF standpoint, including such issues as inflation and exchange rate risk
5. Weighted average cost of capital (WACC) and the discount rate

Day 3: Ratio analysis and other valuation techniques

1. Calculation and interpretation of principal ratios
   Practical exercise: ratio analysis in an M&A transaction
2. Real options
   Case studies: Participants will study a range of real option calculations using customized spreadsheet models
   Exercise: Participants will apply asset-based valuations to a management-buy out
3. Economic value added (EV Atm)
   Participants will review several airlines from the point of view of value creation and destruction and their causes using supplied EVA spreadsheet models
4. Cash flow return on investment (CFROI)
   Participants will have the opportunity to use an actual CFROI spreadsheet model for valuation

Concluding exercise: Participants will review a private company for valuation using a range of different valuation techniques.