Home > Store

Pragmatist's Guide to Leveraged Finance, A: Credit Analysis for Bonds and Bank Debt

Register your product to gain access to bonus material or receive a coupon.

Pragmatist's Guide to Leveraged Finance, A: Credit Analysis for Bonds and Bank Debt

eBook (Watermarked)

  • This product currently is not for sale.
  • Includes EPUB and PDF
  • About eBook Formats
  • This eBook includes the following formats, accessible from your Account page after purchase:

    ePub EPUB The open industry format known for its reflowable content and usability on supported mobile devices.

    Adobe Reader PDF The popular standard, used most often with the free Acrobat® Reader® software.

    This eBook requires no passwords or activation to read. We customize your eBook by discreetly watermarking it with your name, making it uniquely yours.

Not for Sale

Description

  • Copyright 2012
  • Dimensions: 6" x 9"
  • Edition: 1st
  • eBook (Watermarked)
  • ISBN-10: 0-13-285527-5
  • ISBN-13: 978-0-13-285527-3

The high-yield leveraged bond and loan market (“junk bonds”) is now valued at $3+ trillion in North America, €1 trillion in Europe, and another $1 trillion in emerging markets. What’s more, based on the maturity schedules of current debt, it’s poised for massive growth. To successfully issue, evaluate, and invest in high-yield debt, however, financial professionals need credit and bond analysis skills specific to these instruments. Now, for the first time, there’s a complete, practical, and expert tutorial and workbook covering all facets of modern leveraged finance analysis. In A Pragmatist’s Guide to Leveraged Finance, Credit Suisse managing director 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 and potentially escaping leveraged finance covenants; how to assess equity (and why it matters); investing on news and events; early stage credit; and creating accurate credit snapshots. This book is an indispensable resource for all investment and underwriting professionals, money managers, consultants, accountants, advisors, and lawyers working in leveraged finance. In fact, it teaches credit analysis skills that will be valuable in analyzing a wide variety of higher-risk investments, including growth stocks.

Sample Content

Table of Contents

Chapter 1 Introduction     1

Chapter 2 Common Leveraged Finance Terms     7

General Terms     7

Yield and Spread Definitions     11

Questions     14

Chapter 3 Defining the Market and the Ratings Agencies     17

Chapter 4 The Participants     21

The Issuers     21

The Sell Side     22

The Buy Side     23

Private Equity     25

Chapter 5 Why Is Leveraged Finance Analysis Unique?     27

Chapter 6 The Major Components of Analysis     31

The Components     32

A Pragmatic Point on the Various Aspects of Analysis     34

Chapter 7 Some Features of Bank Loans     35

Questions     40

Chapter 8 A Primer on Prices, Yields, and Spreads     41

The Basics     41

A Few Points on Yields     43

A Few Points on Spreads     43

Bank Loan Coupons     44

Duration     45

Total Returns     45

Deferred Payment Bonds: Prices and Yields     46

A Pragmatic Point on Terminology     48

Questions     49

Chapter 9 A Primer on Key Points of Financial

Statement Analysis     51

EBITDA     52

Capital Expenditures     57

Interest Expenses     58

Taxes     59

Changes in Working Capital     59

Free Cash Flow     61

The Balance Sheet     62

A Pragmatic Point on Financial Statements     64

Questions     65

Chapter 10 Credit Ratios     67

EBITDA/Interest Ratio     69

Debt/EBITDA     72

A Pragmatic Point on the Leverage Ratio     76

A Pragmatic Point on Valuations     77

Free Cash Flow Ratios     79

Changes in Working Capital     80

Dividends     80

Acquisitions     80

One-Time Charges     81

The FCF/Debt Ratio     82

A Pragmatic Point on Free Cash Flow     82

Questions     84

Chapter 11 Business Trend Analysis and Operational Ratios     85

Business Trends     86

Margins and Expenses     88

Capital Expenditures     91

Questions     93

Chapter 12 Expectations, Modeling, and Scenarios     95

Sales and Revenue     96

A Full Model     99

Scenarios     108

A Pragmatic Point on Bank Maintenance Covenants and Expectations     110

Questions     112

Chapter 13 Structural Issues: Coupons     113

Loan Coupons     113

Bond Coupons     115

Zero and Zero-Step Coupons     115

How the Coupon Is Determined     121

Modeling Changes in Coupons     122

Questions     123

Chapter 14 Structural Issues: Maturities, Calls, and Puts     125

Maturities     125

Calls     126

Clawback     129

10% Call     130

Cash Flow Sweeps     131

AHYDO     132

Other Bank Prepayments     132

Open-Market Repurchases     133

A Pragmatic Point on Early Refinancing of Debt     134

Questions     136

Chapter 15 Structural Issues: Ranking of Debt     137

Ranking     138

Structural Subordination     141

Subsidiary Guarantees     145

Questions     148

Chapter 16 Key Leveraged Finance Covenants     149

Debt Incurrence     151

Defined Terms and Carve-outs     153

Defined Term Examples     154

Carve-outs     155

Restricted Payments     156

Change of Control     158

Asset Sale     160

Reporting Requirements     161

Other Covenants     162

Affirmative/Maintenance Covenants     163

Restricted and Unrestricted Groups     165

Questions     167

Chapter 17 Amendments, Waivers, and Consents     169

Questions     177

Chapter 18 Making Money or Losing It Off of News Events     179

Scenario: An Issuer Makes an Acquisition     180

FastFoodCo (FFC) Facts     180

GoodFoodCo (GFC) Facts     181

Deal Facts     181

Scenario: The Issuer Gets Bought     185

Scenario: An Issuer Announces an IPO     189

Scenario: An Issuer Is Facing a Maturity     192

A Pragmatic Point on the Blended Price to Retire Debt     194

Questions     195

Chapter 19 Management and Ownership     197

Chapter 20 I’m Looking at Debt, So Why Does Equity Matter     201

Valuation     201

Monitoring Equities     206

Questions     208

Chapter 21 Value, Relative Value, and Comparable Analysis     209

Questions     216

Chapter 22 New Issuance     217

Chapter 23 Distressed Credits, Bankruptcy, and Distressed

Exchanges     221

Claims     224

Classes of Claims     226

Subordination     227

Claims Arising from Bankruptcy     229

Valuing the Enterprise     230

Sale or Restructuring     231

Restructuring Without Bankruptcy     234

A Few Pragmatic Points on Bankruptcy Reorganizations     236

Questions     238

Chapter 24 Preparing a Credit Snapshot     239

Chapter 25 The Investment Decision Process     243

A Sample Investment Process     244

Big-Picture Items     245

The Company     245

Credit Fundamentals     246

Event Analysis     246

Security Analysis     247

Relative Value and Return     247

The Decision     247

Some Investment Traps     248

Chapter 26 Closing Comments     251

Answers     253

Index     259

Updates

Submit Errata

More Information

InformIT Promotional Mailings & Special Offers

I would like to receive exclusive offers and hear about products from InformIT and its family of brands. I can unsubscribe at any time.

Overview


Pearson Education, Inc., 221 River Street, Hoboken, New Jersey 07030, (Pearson) presents this site to provide information about products and services that can be purchased through this site.

This privacy notice provides an overview of our commitment to privacy and describes how we collect, protect, use and share personal information collected through this site. Please note that other Pearson websites and online products and services have their own separate privacy policies.

Collection and Use of Information


To conduct business and deliver products and services, Pearson collects and uses personal information in several ways in connection with this site, including:

Questions and Inquiries

For inquiries and questions, we collect the inquiry or question, together with name, contact details (email address, phone number and mailing address) and any other additional information voluntarily submitted to us through a Contact Us form or an email. We use this information to address the inquiry and respond to the question.

Online Store

For orders and purchases placed through our online store on this site, we collect order details, name, institution name and address (if applicable), email address, phone number, shipping and billing addresses, credit/debit card information, shipping options and any instructions. We use this information to complete transactions, fulfill orders, communicate with individuals placing orders or visiting the online store, and for related purposes.

Surveys

Pearson may offer opportunities to provide feedback or participate in surveys, including surveys evaluating Pearson products, services or sites. Participation is voluntary. Pearson collects information requested in the survey questions and uses the information to evaluate, support, maintain and improve products, services or sites, develop new products and services, conduct educational research and for other purposes specified in the survey.

Contests and Drawings

Occasionally, we may sponsor a contest or drawing. Participation is optional. Pearson collects name, contact information and other information specified on the entry form for the contest or drawing to conduct the contest or drawing. Pearson may collect additional personal information from the winners of a contest or drawing in order to award the prize and for tax reporting purposes, as required by law.

Newsletters

If you have elected to receive email newsletters or promotional mailings and special offers but want to unsubscribe, simply email information@informit.com.

Service Announcements

On rare occasions it is necessary to send out a strictly service related announcement. For instance, if our service is temporarily suspended for maintenance we might send users an email. Generally, users may not opt-out of these communications, though they can deactivate their account information. However, these communications are not promotional in nature.

Customer Service

We communicate with users on a regular basis to provide requested services and in regard to issues relating to their account we reply via email or phone in accordance with the users' wishes when a user submits their information through our Contact Us form.

Other Collection and Use of Information


Application and System Logs

Pearson automatically collects log data to help ensure the delivery, availability and security of this site. Log data may include technical information about how a user or visitor connected to this site, such as browser type, type of computer/device, operating system, internet service provider and IP address. We use this information for support purposes and to monitor the health of the site, identify problems, improve service, detect unauthorized access and fraudulent activity, prevent and respond to security incidents and appropriately scale computing resources.

Web Analytics

Pearson may use third party web trend analytical services, including Google Analytics, to collect visitor information, such as IP addresses, browser types, referring pages, pages visited and time spent on a particular site. While these analytical services collect and report information on an anonymous basis, they may use cookies to gather web trend information. The information gathered may enable Pearson (but not the third party web trend services) to link information with application and system log data. Pearson uses this information for system administration and to identify problems, improve service, detect unauthorized access and fraudulent activity, prevent and respond to security incidents, appropriately scale computing resources and otherwise support and deliver this site and its services.

Cookies and Related Technologies

This site uses cookies and similar technologies to personalize content, measure traffic patterns, control security, track use and access of information on this site, and provide interest-based messages and advertising. Users can manage and block the use of cookies through their browser. Disabling or blocking certain cookies may limit the functionality of this site.

Do Not Track

This site currently does not respond to Do Not Track signals.

Security


Pearson uses appropriate physical, administrative and technical security measures to protect personal information from unauthorized access, use and disclosure.

Children


This site is not directed to children under the age of 13.

Marketing


Pearson may send or direct marketing communications to users, provided that

  • Pearson will not use personal information collected or processed as a K-12 school service provider for the purpose of directed or targeted advertising.
  • Such marketing is consistent with applicable law and Pearson's legal obligations.
  • Pearson will not knowingly direct or send marketing communications to an individual who has expressed a preference not to receive marketing.
  • Where required by applicable law, express or implied consent to marketing exists and has not been withdrawn.

Pearson may provide personal information to a third party service provider on a restricted basis to provide marketing solely on behalf of Pearson or an affiliate or customer for whom Pearson is a service provider. Marketing preferences may be changed at any time.

Correcting/Updating Personal Information


If a user's personally identifiable information changes (such as your postal address or email address), we provide a way to correct or update that user's personal data provided to us. This can be done on the Account page. If a user no longer desires our service and desires to delete his or her account, please contact us at customer-service@informit.com and we will process the deletion of a user's account.

Choice/Opt-out


Users can always make an informed choice as to whether they should proceed with certain services offered by InformIT. If you choose to remove yourself from our mailing list(s) simply visit the following page and uncheck any communication you no longer want to receive: www.informit.com/u.aspx.

Sale of Personal Information


Pearson does not rent or sell personal information in exchange for any payment of money.

While Pearson does not sell personal information, as defined in Nevada law, Nevada residents may email a request for no sale of their personal information to NevadaDesignatedRequest@pearson.com.

Supplemental Privacy Statement for California Residents


California residents should read our Supplemental privacy statement for California residents in conjunction with this Privacy Notice. The Supplemental privacy statement for California residents explains Pearson's commitment to comply with California law and applies to personal information of California residents collected in connection with this site and the Services.

Sharing and Disclosure


Pearson may disclose personal information, as follows:

  • As required by law.
  • With the consent of the individual (or their parent, if the individual is a minor)
  • In response to a subpoena, court order or legal process, to the extent permitted or required by law
  • To protect the security and safety of individuals, data, assets and systems, consistent with applicable law
  • In connection the sale, joint venture or other transfer of some or all of its company or assets, subject to the provisions of this Privacy Notice
  • To investigate or address actual or suspected fraud or other illegal activities
  • To exercise its legal rights, including enforcement of the Terms of Use for this site or another contract
  • To affiliated Pearson companies and other companies and organizations who perform work for Pearson and are obligated to protect the privacy of personal information consistent with this Privacy Notice
  • To a school, organization, company or government agency, where Pearson collects or processes the personal information in a school setting or on behalf of such organization, company or government agency.

Links


This web site contains links to other sites. Please be aware that we are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of each and every web site that collects Personal Information. This privacy statement applies solely to information collected by this web site.

Requests and Contact


Please contact us about this Privacy Notice or if you have any requests or questions relating to the privacy of your personal information.

Changes to this Privacy Notice


We may revise this Privacy Notice through an updated posting. We will identify the effective date of the revision in the posting. Often, updates are made to provide greater clarity or to comply with changes in regulatory requirements. If the updates involve material changes to the collection, protection, use or disclosure of Personal Information, Pearson will provide notice of the change through a conspicuous notice on this site or other appropriate way. Continued use of the site after the effective date of a posted revision evidences acceptance. Please contact us if you have questions or concerns about the Privacy Notice or any objection to any revisions.

Last Update: November 17, 2020