Valuing Distressed Debt Course
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Location: London (Central) |
Dates: 01.11.2012 - 02.11.2012 | Duration: 2 Days | Price: 1,375.00 GBP |
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The valuation of a distressed debt security requires significant judgment, not least because the traditional approaches to valuation are invariably undermined by the absence of reliable financial forecasts. In this context, valuation may be affected to a material extent by other, extraneous factors which, in some cases can often have an as much of a bearing on value as the valuation methodology. Course categories:Debt / Fixed Income Courses, Asset Management Courses, Credit Courses, Financial Modelling, Hedge Funds Courses, Trading Courses, Asset Management Inhouse, Capital Markets Inhouse, Debt / Fixed Income Inhouse, Financial Modelling Inhouse, Hedge Funds Inhouse |
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Overview of Debt Markets Introduction to the various segments in the debt markets. Most distressed credits will have been high yield pre-distress but a few credits may have started out as I-Grade before they became fallen angels Anatomy of a deal Status/timeline in distress Triggers for restructuring Restructuring can be triggered by various factors but directors’ personal liability for wrongful trading is usually the key Valuation methodologies Valuation lies at the heart of any investment or credit decision. However, valuation methods that rely on forecasting future cash flows (or profits) may often be extremely unreliable when the company is in distress and other, extraneous factors may have as great or even greater bearing on value. Sources of Information Financial and other relevant Information is critical to developing an acceptable valuation range of the firm or asset. The availability and accessibility of such information will turn on a range of factors critically whether the investor is an existing or new investor. Obtaining information on Listed securities (e.g. Note) is comparatively easy but accessing information on private debt markets can be extremely difficult for potential investors with no locus standi Problem areas (hidden liabilities) Identifying the full extent of the liabilities is never easy and, for distressed firms, the lack of timely and reliable information can inhibit this process. Additionally, various restructuring scenarios can produce a range of varying outcomes for these liabilities (e.g. renegotiating leases) Reasons for distress Where the company is overleveraged, rebalancing the capital structure can be done more quickly than having to address strategic issues |
Position in the Capital Structure (Ranking) Stakeholders in the fulcrum capital will often drive the restructuring process so finding where the value breaks is a key issue for investing in distressed debt. The fair value of a debt obligation expected to receive a partial recovery is often the most difficult to estimate due to the uncertainty surrounding both a distressed company’s value and the value of the individual security. The role of Security Historical data has shown that secured lenders invariably achieve a better recovery in distress but having security is not enough Structure of (Lending) syndicate The composition of Lending syndicate can include primary and secondary players with competing agendas (e.g. yield, value arbitrage, loan to own) with differing pain thresholds which can also affect the restructuring proposals and thus value Jurisdiction issues (Forum shopping) Forum shopping (Jurisdictional) has become increasingly topical and can have material impact on valuation (e.g. Wind Hellas). Debt for Equity swaps Holders of debt will often end up some form of equity via a D4E swap. This section looks at the issue of D4E and the critical issues that follow Tactics for Managing Key Stakeholders to best effect The success enjoyed by Oaktree Capital illustrates the importance of adopting the right tactics. Buy too high (safely) risk achieving a low return investors but buy too high and risk losing all. |
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CONTACT US |
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Email: info@financialveritas.com Phone: +44 208 133 5917 |
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