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Analyzing Credit Risk

Analyzing Credit Risk. Prepared for the Transportation Revenue Management Group Orlando, Florida April 16, 2012. Val Venable, CCE Ascend Performance Materials, LLC Global Director of Credit valvenablecce@aol.com. I’ve heard it before…. They have never stuck us yet

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Analyzing Credit Risk

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  1. Analyzing Credit Risk Prepared for the Transportation Revenue Management Group Orlando, Florida April 16, 2012 Val Venable, CCE Ascend Performance Materials, LLC Global Director of Credit valvenablecce@aol.com

  2. I’ve heard it before….. • They have never stuck us yet • The check is in the mail • They want to pay us but their system is down • I know the guy, he has an airplane and a yacht • I had money in the account, the bank just messed up • THEY ARE TOO BIG TO FAIL

  3. Types of Risk Company • Financial • Market/Industry • Bank • Character Country • Financial • Market/Industry • Bank Portfolio • Financial • Market/Industry

  4. Where to Look…

  5. Where to Look… • Customer Financial Statements • Commercial Credit Reporting Agencies • SEC (Public Companies or Public Debt) • On line news and finance web sites • Industry groups/Other Vendors • Rating Agencies • Sales Team • Analyst’s Report/Earnings Call

  6. What to Look for • Key personnel changes • Decisions made by “consultant” • Timing of financing expiration • Change in payment behavior • Request for longer terms • Increase in credit references • Failure to provide financials • Bond default • Deterioration in cash flow/margins/capex investment

  7. Late Pay vs. No Pay Failure to Pay on time • Deteriorating ratios • Loan/bond payment due • Quarter plays • Tax periods Failure to Pay • Loans not renewed • Covenant breach • Hiring Insolvency Professional • Loss of Credit Insurance

  8. Risk Scorecards One Size Fits All

  9. Risk Scorecards • Determine short term vs. long term • Public or Privately held • Is there an NDA in effect • Commonly disclosed data • Relevant to your industry • Test drive the model • Evaluate for seasonality • Don’t rely solely on outside data

  10. Questions

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