Credit analysis for corporate issuers

Question 1

qualitative factors for corp.

Answer 1

. business model
. industry competition
. business risk
. corporate governance: covenants and acc. policies

Question 2

quantitative factors for corp.

Answer 2

. strong operating margin(ebit/revenue)
. low level of leverage(debt/ebitda)
. high coverage of debt(ebit/expenses)
.high level of liquidity to met short term obligations(rcf/cash-markeatable securities)

Question 3

1.EBITDA
2.CFO
3.FFO
4.FCF
5.RCF

Answer 3

EBITDA = OPERATING INCOME + DEPREC.
CFO = NI + NCC- INCREASE OF WK
FFO = CFO + INCREASE OF WK
FCF = CFO - GASTOS X ACTIVO FIJO + NI EXP.
RCF = OPERATING CASHFLOW - DIVIDENDS

Question 4

SENIORITY RANKING

Answer 4

1. FIRST LIEN/MORTAGE
2. SENIOR SECURED
3. JUNIOR SECURED
4. SENIOR UNSECURED
5. SENIOR SUBORDINATED
6. SUBORDINATED
   7.JUNIOR SUBORDINATED

Question 5

CORPORATE FAMILY RATING (CFR)

Answer 5

ISSUER RATING SPECIALLY OF THE SENIOR UNSECURED

Question 6

CORPORATE CREDIT RATING (CCR)

Answer 6

ISSUE SPECIFIC RATING

Question 7

NOTCHING

Answer 7

when credit rating of the issue -specific is high or low than the rating of the issuer (less probable for highly rated)

Question 8

STRUCTURAL SUBORDINATION

Answer 8

LA SUBSIDIARIA TIENE PRIORITY OF CLAIM QUE LA MATRIZ Y POR ELLO LA MATRIZ TIENE MAYOR SPREAD Y MENOR RATING.