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Commercial Banking – Debt Modeling Course Overview
This course covers the key components of building a debt model commonly used by commercial banks in assessing a borrower’s cash flows and performing covenant analysis. In this course, we will discuss the differences between operating finance (operating line of credit) and term lending (term loans). We will walk through the major components of a debt model, including the yearly debt schedules, covenant analysis, monthly operating line analysis, and a quick overview of a risk rating model. By the end of this course, you should be able to construct a fully-linked debt model which entails the cash flow forecast of a borrower, its debt capacity, the impact of cash sweep, and any early warning signs of a covenant breach.Commercial Banking – Debt Modeling Learning Objectives
- Upon completing this course, you will be able to:
- Differentiate between operating finance (operating line of credit) and term lending (term loans)
- Understand the benefits of using different types of credit facilities
- Build a yearly-debt schedule laying out the different types of debt drawn, the interest expense, and the principal repayments
- Perform covenant analysis to identify early warning signs and possibilities of breach
- Construct a monthly operating line analysis to determine the operating line drawn and the amount available based on margining
- Understand how the amount of leverage could impact a company’s risk rating
