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

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FT Press, 2012 - Business & Economics - 268 pages
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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. InA 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.
 

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Contents

Chapter 1 Introduction
1
Chapter 2 Common Leveraged Finance Terms
7
Chapter 3 Defining the Market and the Ratings Agencies
17
Chapter 4 The Participants
21
Chapter 5 Why Is Leveraged Finance Analysis Unique?
27
Chapter 6 The Major Components of Analysis
31
Chapter 7 Some Features of Bank Loans
35
Chapter 8 A Primer on Prices Yields and Spreads
41
Chapter 16 Key Leveraged Finance Covenants
149
Chapter 17 Amendments Waivers and Consents
169
Chapter 18 Making Money or Losing It Off of News Events
179
Chapter 19 Management and Ownership
197
Chapter 20 Im Looking at Debt So Why Does Equity Matter?
201
Chapter 21 Value Relative Value and Comparable Analysis
209
Chapter 22 New Issuance
217
Chapter 23 Distressed Credits Bankruptcy and Distressed Exchanges
221

Chapter 9 A Primer on Key Points of Financial Statement Analysis
51
Chapter 10 Credit Ratios
67
Chapter 11 Business Trend Analysis and Operational Ratios
85
Chapter 12 Expectations Modeling and Scenarios
95
Coupons
113
Maturities Calls and Puts
125
Ranking of Debt
137
Chapter 24 Preparing a Credit Snapshot
239
Chapter 25 The Investment Decision Process
243
Chapter 26 Closing Comments
251
Answers
253
Index
259
Copyright

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About the author (2012)

Robert S. Kricheff, Managing Director and Head of the Americas High Yield Sector Strategy for Credit Suisse, has more than 20 years of experience in credit analysis. He has followed industries including media, cable, satellite, telecom, gaming, entertainment, healthcare, and energy; worked with emerging market corporates; and performed both strategy and portfolio analysis. His work has covered investment vehicles including bonds, converts, loans, preferred stocks, and credit default swaps. He holds a BA from New York University in Economics, and an MS c from the University of London SOAS in Financial Economics.

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