Course description
Whilst fixed income continues to be one of the most dominant asset classes for issuers and investors, often the analysis of the credit risk associated with the instrument remains limited to a simple review of the instrument’s credit rating.
This course seeks to address this issue – reviewing not just the credit risk profile of the issuer, but also the structural features of this instrument that can make an investor’s position either weak or strong.
Upcoming start dates
Suitability - Who should attend?
This course has been designed to suit anyone involved in fixed income – from sales to origination, and from trading to operational support, critically:
- Asset managers & Bond Sales staff seeking to improve their knowledge of fixed income from the credit perspective
- Infrastructure staff seeking to gain a better understanding of the fixed income product beyond pricing & yield curves
Outcome / Qualification etc.
By the end of the programme delegates will be able to:
- Undertake a credit risk assessment of a typical corporate fixed income issuer – from a qualitative perspective
- Review and opine on the quality & strength of the issuer’s key credit metrics
- Explain the ways in which a fixed income instrument can be structured effectively to protect the investor
- Provide an overview of the types of covenant that might typically be found in a fixed income instrument
- Explain how collateral, if provided by the issuer can provide for a better recovery for a bond in distress
- Describe how a bond can become structurally subordinated and how this structural subordination might be defeated
- Illustrate the ratings process for a first-time issuer in the bond markets
- Review and provide a commentary on bond default and transition rates across the ratings spectrum
Training Course Content
Days 1 & 2: Credit Risk
- How does credit risk arise in fixed income?
- Evaluating qualitative vs. quantitative risks presented by a typical corporate issuer
- Qualitative risk: a review of the key approaches and methodologies
- Quantitative risk: a review of the key credit metrics:
- A focused approach to balance sheet and income statement evaluation
- Understanding the essence of corporate cash flow analysis
- Using financial metrics (ratios) to evaluate the credit risk of a corporate – from profitability to liquidity, from efficiency to solvency and more
- An overview of the rating agency approach to credit analysis; how corporate credit ratings are derived and assigned
Day 3: Protecting the Investor
- The three ‘threads’ of investor protection: collateral, covenants and subordination
- Understanding the world of covenants: Maintenance vs. Incurrence covenants
- Examples; How to spot potential covenant deficiencies
- A comparison of debt products and the levels of investor protection that they afford
- Collateral: how often do we see fixed income instruments with security packages?
- Types of collateral – the advantages & disadvantages
- Collateral and debt recovery rates
- The hazards of taking collateral
Day 4: Protecting the Investor (continued)
- Subordination – defining contractual, structural and cash flow-based subordination
- How structural subordination can arise in a variety of corporate structures
- Defeating structural subordination
- The fixed income instrument in distress
- Understanding the drivers of fixed income defaults, investment grade vs. high yield instruments
- A review of historic transition and default rates – globally and by industry sector
Course delivery details
Livestreamed Course
ICMA courses are delivered via video conferencing accessed on our digital learning platform, using the most effective pedagogical approaches and incorporating interactive functions like virtual breakout rooms.
The Assessing the Credit Risk of Corporate Bonds live sessions are delivered in four 3.5 hour sessions over the course of two weeks. You will be given access to the course materials before the live sessions, and will have access to those for a total of three months from the first live session. During these three months you will have the option to keep working through the course materials at your own pace.
Expenses
Livestreamed course fees
- Members: EUR 1,850 + VAT (if applicable)
- Non-members: EUR 2,390 + VAT (if applicable)
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International Capital Market Association
For close to 50 years, ICMA’s educational offering has played a major part in its mission to raise standards in the international capital market. Our courses are designed and delivered by industry professionals for industry professionals. The offering comprises a...