Debt Portfolio and Asset Securitisation

To improve familiarity with the core concepts of debt sale at portfolio level both current and classified. The course will cover securitization of debt portfolio and study of the various options such as sub-participation agreements and other form of conduit structures.

Case studies will be used to high light legal documentation, legal audit, due diligence, valuation and ratings.

Course Content:

Day One

Issuer Analysis
 Financial Snapshot
 Trends
 Identify Debt Portfolio Analysis
• Segmented by Industry
• Breakdown by duration
• Exposure to derivatives
• Analysis of contingent liabilities
• Capital adequacy ratios
• Organisational changes
 Market reports

Loan Specific Analysis
 Term Sheet
 Financial Covenants
 Representation & Warranties
 Documentation
 Pari-passu ranking
 Pricing
 Rights of Lenders to Information
 Country Limits
 Cross-border risks
 Structure and ease of enforcement
 Insolvency law in country of incorporation
 Effect of use of tax shelters and SPV structures

Case Study : Groups to study credit packs and arrive at an understanding of the structuring the sale of debt portfolio from both published data of bank debts and those of insurance companies which includes bilateral loans, syndications, sub-participations and securitized loans including bonds and other tradable assets.

Syndicated Loans & Sub-Participations
 Primary market
• Qualifying Borrowers
• Sectors
• Pricing Considerations
• Underwritten vs Best Efforts
• Participation vs sub-participation
 Secondary market
• Flexibility to mange portfolio
• Securitisation lead to MTNs and Bonds
• Potential re-emergence of this market
• Assignment vs Transfer
• Means of new market penetration
• Economies of ScaleRelationship banks
• Industry Specialist Banks
• Manage country and industry exposure for participant banks
• “Churn” vs “Sponge”
 Divisions of Labour
 Origination –normally undertaken by Relationship Banks
 Credit Risk Analaysis- Industry Specialist Documentation
 Spreading of Risks- examining role of
• Arranger
• Underwriter
• Lead Manager
• Participant
• Sub-Participant
• Agent
• Security Agent
• Escrow Agent

Credit Analysis and Pricing
 How to assess a portfolio’s credit
 Pricing a portfolio
 Identifying and analysing comparative deals
 Assessing the role of maturity in pricing
 Other factors which can effect price
 Examining the role of ancillary business when pricing, within the context of lead arrangers

Evaluating margins and their significance
 Function of the margin
 Analysis of the step up and step down margin

Case Study: Benefit by participating in this intensive case study where you will, working in 'syndication teams', structure and price a deal taking all newly learnt skills into account

Day Two

Assessing the legal considerations
 What is the role of the arranger?
 Examining the key concepts
 Consideration of covenants - Pari Passu/ Environmental
 Assessment of trigger points
 The agent's liability
 Legal Audit
 Why it can not be left to the lawyers?

Legal Documentation Process
 Banks Interest vs Lawyers Interests
 Discretion to any Lender may mke the Loan riskier
 Lender default – prior to full draw down
 Assignment of obligations and Sale of Loan
 Stamp Duty and Tax implications of Sale or Transfer
 Specialised Commercial knowledge- distinct from legal knowledge

The practical implications of the growth of the secondary market and the emergence of the LMA and their impact on the primary market

Secondary market

>LMA – in the UK

>LSTA – in the US

 Assessing current activity:
• recent growth in the market
• assessment of effect of growth on banks of lower credit rating impact of ICI deal
 Aims of the Loan Market Association
• standardisation of the documentation for primary deals and its implications
• common language of transferability for secondary trading and its implications

Impact of the secondary market on the primary market
 Negotiating the transferability clause in primary documentation
 Hidden blocks to transferability in the primary loan agreement
 Confidentiality agreement between bank and borrower and its effects in secondary selling of the loan
 Key legal issues
 Methods of transfer

FINANCIAL COVENANTS AND MARGIN PROVISION

Understanding financial covenants: the bank's safeguard against a portfolio’s change in credit rating
 Due diligence in buying/selling a portfolio
 Flow of earnings in conduit structures
 Gearing levels and Interest cover
 Total indebtedness
 Examining which covenants are appropriate for different types of borrowing
 Valuations of Loan Portfolios
 Ratings used as guide in arriving at Valuations
 Qualitative and Quantitative guidelines

Devising fee structure and its proportionment
 Calculating the fees payable on a deal:
 underwriters fee
 sub-underwriters fee
 management fee

Different loan types and examining the range of pricing
 Assessing structure: reasons and key credit factors for this range:
 corporate loan
 loan as a bridging facility
 project deals
 MBO's

Links between Loan Portfolio Management and the primary and secondary markets
 How Loan Portfolio Managers relate to the syndication teams in terms of their roles in:
• diversification of risk
• managing credit lines
• the use of credit derivatives
 Implications for syndication teams of Portfolio Management decisions

Delivery:	In house
Category:	Asset Management