High Yield and Leverage Finance

This course begins with foundation work covering the background of high yield and leveraged finance markets, the instruments and their key terms and conditions, leveraged buyout (LBO) structuring, and a cash flow template that provides key insights on corporate debt service capacity.

The course then considers business, financial and instrument aspects of high yield credit analysis, recovery analysis and common drivers of corporate distress, and valuation. Real company examples and in-depth case studies cover a variety of high yield issuers across sectors, with a focus on the US. These case studies illustrate various types of investment situations that arise in the high yield space – companies in structural decline, successful and unsuccessful LBOs, turnaround situations, highly cyclical businesses and fallen angels.

The program caters for delegates at all experience levels, from beginner, through intermediate to advanced.

• High yield credit analysts, Equity analysts
• High yield asset managers
• Hedge fund managers
• Distressed debt investors
• Private equity investors
• Loan portfolio managers
• Mergers and acquisitions bankers
• Debt capital markets/leveraged finance bankers
• CLO managers, Strategy consultants
• Business turnaround/restructuring accountants/corporate finance professionals

• Basic understanding of financial statements
• Basic familiarity with Excel

Foundations

• High yield and leveraged finance market background – size, history, participants, historic returns and default rates, composition, credit rating agencies
• Instruments and their key terms and conditions – high yield bonds and leveraged loans, bank debt (revolvers, working capital facilities, bridge finance, and capital expenditure facilities), and PIKs; credit default swaps; corporate structure and capital structure; covenants; security packages and enforcement rights; guarantors; call schedules
• Leveraged buyouts (LBOs) – overview of deal structuring
• Cash flow template to provide key insights on debt service capacity

Example: Hertz Global Holdings, Inc. (car rental company)

Workshop 1:  Evaluating key terms and conditions of Toys R Us Inc’s (US toy retailer) bonds; preparing and interpreting cash flow template

High Yield and Leveraged Finance Analysis and Investing

• Delineation of credit analysis process: business assessment, financial assessment, and instrument assessment
• Business assessment – products, competition, customers, company
• Financial assessment – financial statement analysis, forward-looking financial modeling, key credit metrics, covenant compliance testing, liquidity analysis, and debt service capacity
• Instrument assessment – covenant, seniority, security, and guarantor protection
• Stress-testing – what does it take to “break” the company? What are the key ways in which companies get into distress? What are recovery prospects?
• Valuation – identifying comparables for relative valuation; absolute valuation

Example: Hertz Global Holdings, Inc. (car rental company)

Workshop 2:  Are Toys R Us Inc’s senior unsecured bonds an attractive investment?

Case Studies

Case Study 1: Identifying and analyzing companies in structural decline

Example: Norske Skogindustrier ASA (Norwegian-based global newsprint and magazine paper producer)

Case Study 2: The vicissitudes of an LBO

Example: Freescale Semiconductor, Inc. (US semiconductors manufacturer)

Case Study 3: Competition in the US supermarket retail

Example: SUPERVALU, Inc. (US supermarket and pharmacy retailer)

Workshop 3: Can Seadrill Limited (offshore deepwater rig company) survive and are its bonds an attractive investment?

Case Study 4: Identifying, analyzing, and investing in a successful turnaround situation

Example: MGM Resorts International (US gaming, hospitality, and entertainments resorts operator)

Case Study 5: Analyzing and investing in cyclical businesses

Example: Freeport McMoRan, Inc. (US metals, mining, and energy group)

Case Study 6: Analyzing many-entity international groups

Example: Liberty Group, Inc. (international cable/multimedia company)

Workshop 4:  Can Sears Holdings Corporation (US department store retailer) survive and are its bonds an attractive investment?