The Banking and Corporate Finance Training Specialist

Debt Finance

This course can be presented in-house for you on a date of your choosing

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+44 (0)20 7387 4484

Course Overview

With over 30 years’ experience in both the training field and in finance, the trainer is regarded as a leading edge trainer in numerous areas. He specializes in Derivatives, Capital

Markets, Risk Management, Structured Finance and Treasury Products. He has delivered programs in every major financial center to both buy-side and sell-side firms at all levels.

For more than three decades, the trainer has held various positions in several commercial and international investment banks. Key roles have included positions as Head of

Institutional & Corporate Sales as well as being the Head of the Private Client Investment Desk.

He is The Chief Examiner for The Chartered Institute for Securities and Investments Bond and Fixed Income Examination.

This programme has been designed to provide a thorough review of debt financing principles, markets and products. We will use real life case study examples to illustrate the

financing techniques and products throughout the programme. Participants will require laptops with MS Excel for the exercises and case

studies.

The broad objectives of the programme are: To provide a complete review of debt financing theory and debt products To identify funding requirements both short and long term

To explain asset based financing To explain the real world use of debt financing techniques using current examples

To explain yield curves, debt pricing in the primary and secondary markets To explain measures for risk management in debt instruments including interest rate

and credit spread sensitivity (duration and convexity) To demonstrate how interest rate and foreign exchange risk can be managed using

derivatives

To explain the world of securitisation post 2009

Day One: The objective of Day-1 is to ensure that participants understand why and how companies

borrow money, the effect that borrowing money has on the financial statement of the company and the role that the bank plays in the process. It also covers sources of finance, products used and investors together with their objectives and expectations.

This module introduces participants to customer funding needs, why they arise

and their nature. Principles of debt finance

Linking finance and corporate strategy

Cost of capital and risk Theory of optimal capital structure

Start-up capital How to calculate the amount Where to get it

Working capital Banks

Course Content

Course Overview

Background of the trainer

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+44 (0)20 7387 4484

Peer to peer lenders Debt versus equity

Advantages and disadvantages

Relative costs Cash flow forecasting

Long and short term financing Case study: Writing the first year’s business plan and cash flow statement.

Module 2 explores the instruments that are available to raise finance and will provide recent examples of products. The following products will be explained:

Fixed and Floating Rate Bonds How to choose between fixed and floating rate

The bond and swap concept Raising finance in a third currency and swapping into a desired currency

Convertible Bonds

Types of convertible Conventional

Mandatory Advantages for issuers and investors Pricing a convertible bond

How convertible bonds exist after issue Asset swaps

The call component Commercial Paper

Commercial paper programmes

The dealer panel Pricing, investing and liquidity

Project Finance an overview of project financing. a typical project finance structure

the parties and their objectives the key issues for lenders

Bank Loans The typical bank loan Security and covenants

Maturity and spreads Syndicated Loans

What are syndicated loans? How are they structured and sold?

Who invests in syndicated loans? The advantages of syndication versus self-negotiated loans

Private Placements

What are private placements? Who invests in private placements and why?

How are private placements structured and sold? The Repo Market

The government bond repo market

The corporate bond repo market Classic repo

Central clearing, collateral, haircuts and mark to market Why use repo and reverse repo?

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Case study: Issuing a corporate bond

In this exercise delegates will undertake the roles of the participants in a corporate bond syndication and will:

Liaise with investors to obtain orders Place orders into the selling syndicate

Create and manage the “book of interest” Calculate the allocation and pricing for book building Allocate the bonds and calculate the cost of funds for the issuer

Day Two:

The objective of Day-2 is to ensure that participants understand yield curves and how to interpret them. Once participants are familiar with yield curves they will learn how to manage currency and interest rate risk. Finally, participants will learn about securitised

products.

Yield curve construction The government bench mark curve

The forward curve and the likely path of rates in future The likely cost of money for the borrower for new bond issues How credit spreads are set

Loss given default Expected default probability

Implied default probability How to decide whether to issue a fixed coupon bond or an FRN

Your view of expected future interest rates compared to the forward curve Pricing a bond in the secondary market

Which interest rate to use

Which credit spread to use Building a discount factor

Cash flow mapping and discounting future cash flows Case study: Understanding yield curves, forward rates and credit spreads and

pricing a corporate bond

Government bond risk management Macaulay and Modified duration

Definition and understanding

Applications DV01 the key to trading, hedging and risk management

Maturity ladders and portfolio management How banks and portfolio managers run their portfolios Convexity

Calculating Applications

The complete view of risk Maturity ladders Duration and convexity

DV01

Exercise – Budgeting interest rate risk in a company

Basic hedging tools for currency and interest rate risk management Interest rate swaps

90 day LIBOR Futures

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Swaptions FX Outright Forwards

FX Options Currency Swaps

Types of exposure Interest rate risk Currency risk

Transaction Translation

Economic Examples of how to hedge each type of risk using derivatives

Case study: hedging interest rate and FX transaction exposure using derivatives

Asset Securitisation Structure of a typical securitisation deal

The Asset pool

The Special purpose vehicle The Capital Structure

Types of securitisation Residential mortgage backed securities Auto loans

Credit card receivables Collateralised loan obligations

Covered bonds Structure properties

Weighted average ratings factors (WARF)

Historical default probabilities and receivable arears Credit enhancements and subordination pre and post crisis

Portfolio returns Funded and synthetic structures

Advantages and disadvantages

Case study: Building a collateralised loan obligation.

Participants will be provided with a pool of available assets and will be asked to build a CLO, calculate the WARF, build the capital structure, price the notes and

calculate the expected return on first loss piece

What Redcliffe’s clients are saying about the course and our trainer

“The trainer is very engaging knowledgeable and can bring the theory to life”

“The trainer is an experienced finance expert that could teach from theoretical

and practical perspectives”