Problem Loan Management Navigating the Credit Crisis
Training
Provided by London Financial Studies
Course Outline
After marginal loans are closed and funded there is usually an opportunity for the loan officer to observe warning signs to prevent those loans from becoming classified or even going into bankruptcy. This course provides a strong analytical foundation so delegates can set up an effective ?Early Warning System? for prospective borrowers and loans already in the portfolio.
This workshop is a banker?s survival guide that explores the dynamics of troubled companies from the perspective of the new credit environment and increasing regulatory requirements ? that is, bankers providing their own methodology for success that is punctuated with real-world examples reinforced with the newest tools available in the banking industry. Participants will take away all worked examples with models.
Who The Course is For
* Officials responsible for handling problem loans at the bank
* Credit analysts and Credit risk managers
* Portfolio managers
* Head of problem loan restructuring
* Head of loan desk
* Accountants
* Head of distressed debt trading
* Central bankers and regulators
Prior Knowledge
A basic knowledge of finance and credit.
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Problem Loan Management Navigating the Credit Crisis
Day One
Introduction to Problem Loan Workout, Policy and Loan Restructuring
* Loan grading
* Technological tools
* Loan review
* Bankruptcy control
* Overdraft management
* Credit policy
* Work-out strategies
Review of Fundamentals of Credit Risk Management and Identifying Troubled Loans
* The Prism Credit Model
* Management and administration
* Business operations & bank relationship
* Loan purpose and repayment
* Protecting the loan: setting up a matrix system
Workshop: Modeling credit decisions utilizing PRISM
Asset Quality Risk
* Common causes of delinquency
* Asset monitoring quality ratios
* Cash flow debt service ratios
* Introducing systematic/diagrammatic approach
* Predicting business failure-scoring models
Workshop: Applying proforma techniques on specific asset quality ratios to isolate cash flow problems
Industry Internal Auditing Standards
* Identify and analyze loans by industry
* Report industry concentrations
* Quantify industry risk
* Incorporate industry analysis into the loan portfolio
Day Two
Analysis of Problem Seasonal Loans
* Financial analysis of problem seasonal loans
* Seasonal loan (credit file) write up
Workshop: Identify storm signals in middle market loan
Cash Flow Workshop ? Bread and Butter of Recognizing Distressed Credits
* Developing a bankers cash flow statement
* How to spot ?funny money?
* Check lists that insure reliability of cash flow analysis
* Cash flow analysis of projects and joint ventures
Workshop: Comprehensive Analysis of Enron?s Fiscal 2000 Cash Flow
Projections 1 - Modern Projection Analysis ? Stress Testing Weak Credits
* Predicting bankruptcy using multiple regression forecasting methodology
* Learning to work with "E" and "F" equations
* Adjusting critical assumptions and value drivers
* The projection write up
Projections 2 ? Working with Risk Simulator Software: Simulation and Dynamic Optimization: New Tools in Credit Risk Management and Debt Recoveries
* Sensitivity analysis vs. simulation
* Finding the certainty level for a specific value range
* Identifying a distribution type
* Defining assumptions and forecasts
* Working with confidence levels
* Determining the expected default frequency
* Dynamic optimization use in debt recoveries
Workshop: Designing simulation and stochastic optimization
Day Three
Introduction to New Techniques for Predicting Financial Distress - Secured and Unsecured Credits, Debt Recoveries and Managing Turnarounds
* Learning to classify a credit / Check list of weaknesses that may cause a company to default on its loans
* Financial distress models
* Internal reports available to monitor the account
* Determining how troublesome loans may be candidates for classification
* Major sources and causes of problem credits
Structure of Loan Workouts
* Immediate action steps
* Analysis of liquidation vs. non liquidation strategy
* The art of negotiation
* Excel workout models
* Lender?s and borrower?s course of action
* Follow-up procedures and documentation
Short Term Restructuring Option: Goal - Stop the Bleeding
* Loan structures
* Lender?s and borrower?s course of action
* Computer Models
o Overdraft facility / Borrowing base facility / Accounts receivable facility
o Trust and warehouse receipt and other inventory secured facilities
Long Term Restructuring Options
* Returning the company to financial health / Financial distress reorganizations
* The McKinsey Valuation Model
* Organizing a restructured corporate valuation appraisal
* Packaging and selling restructured loans as a portfolio
Workshop: Employing stochastic valuations to determine expected default frequency (EDF)
Risk Governance
* Credit Policy Committee and the role of the Board of Directors
* Setting Up Statements of Loan Policy
* The need for capital adequacy in the financial services sector
* CAMELS bank risk rating system
Basel II Pillars 2 & 3 ? an introduction
Global Exposure Systems ? hedging against portfolio decay
Introduction to Problem Loan Workout, Policy and Loan Restructuring
* Loan grading
* Technological tools
* Loan review
* Bankruptcy control
* Overdraft management
* Credit policy
* Work-out strategies
Review of Fundamentals of Credit Risk Management and Identifying Troubled Loans
* The Prism Credit Model
* Management and administration
* Business operations & bank relationship
* Loan purpose and repayment
* Protecting the loan: setting up a matrix system
Workshop: Modeling credit decisions utilizing PRISM
Asset Quality Risk
* Common causes of delinquency
* Asset monitoring quality ratios
* Cash flow debt service ratios
* Introducing systematic/diagrammatic approach
* Predicting business failure-scoring models
Workshop: Applying proforma techniques on specific asset quality ratios to isolate cash flow problems
Industry Internal Auditing Standards
* Identify and analyze loans by industry
* Report industry concentrations
* Quantify industry risk
* Incorporate industry analysis into the loan portfolio
Day Two
Analysis of Problem Seasonal Loans
* Financial analysis of problem seasonal loans
* Seasonal loan (credit file) write up
Workshop: Identify storm signals in middle market loan
Cash Flow Workshop ? Bread and Butter of Recognizing Distressed Credits
* Developing a bankers cash flow statement
* How to spot ?funny money?
* Check lists that insure reliability of cash flow analysis
* Cash flow analysis of projects and joint ventures
Workshop: Comprehensive Analysis of Enron?s Fiscal 2000 Cash Flow
Projections 1 - Modern Projection Analysis ? Stress Testing Weak Credits
* Predicting bankruptcy using multiple regression forecasting methodology
* Learning to work with "E" and "F" equations
* Adjusting critical assumptions and value drivers
* The projection write up
Projections 2 ? Working with Risk Simulator Software: Simulation and Dynamic Optimization: New Tools in Credit Risk Management and Debt Recoveries
* Sensitivity analysis vs. simulation
* Finding the certainty level for a specific value range
* Identifying a distribution type
* Defining assumptions and forecasts
* Working with confidence levels
* Determining the expected default frequency
* Dynamic optimization use in debt recoveries
Workshop: Designing simulation and stochastic optimization
Day Three
Introduction to New Techniques for Predicting Financial Distress - Secured and Unsecured Credits, Debt Recoveries and Managing Turnarounds
* Learning to classify a credit / Check list of weaknesses that may cause a company to default on its loans
* Financial distress models
* Internal reports available to monitor the account
* Determining how troublesome loans may be candidates for classification
* Major sources and causes of problem credits
Structure of Loan Workouts
* Immediate action steps
* Analysis of liquidation vs. non liquidation strategy
* The art of negotiation
* Excel workout models
* Lender?s and borrower?s course of action
* Follow-up procedures and documentation
Short Term Restructuring Option: Goal - Stop the Bleeding
* Loan structures
* Lender?s and borrower?s course of action
* Computer Models
o Overdraft facility / Borrowing base facility / Accounts receivable facility
o Trust and warehouse receipt and other inventory secured facilities
Long Term Restructuring Options
* Returning the company to financial health / Financial distress reorganizations
* The McKinsey Valuation Model
* Organizing a restructured corporate valuation appraisal
* Packaging and selling restructured loans as a portfolio
Workshop: Employing stochastic valuations to determine expected default frequency (EDF)
Risk Governance
* Credit Policy Committee and the role of the Board of Directors
* Setting Up Statements of Loan Policy
* The need for capital adequacy in the financial services sector
* CAMELS bank risk rating system
Basel II Pillars 2 & 3 ? an introduction
Global Exposure Systems ? hedging against portfolio decay
About The Training Provider: London Financial Studies
London Financial Studies - London Financial Studies is a specialist teaching resource that concentrates exclusively on capital markets. We offer individuals, teams and companies expert teaching that combines theoretical understanding with practical experience.
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