A Pragmatist’s Guide to Leveraged Finance: Credit Analysis for Bonds and Bank Debt (paperback) (Applied Corporate Finance)
The high-yield leveraged bond and loan market (“junk bonds”) is now valued at + trillion in North America, €1 trillion in Europe, and another trillion in emerging markets. What’s more, based on the maturity schedules of current debt, it’s poised for massive growth. To successfully issue, evaluate, and invest in high-yield debt, however, financial professionals need credit and bond analysis skills specific to these instruments. Now, for the first time, there’s a complete, practical, and expert tutorial and workbook covering all facets of modern leveraged finance analysis. In A Pragmatist’s Guide to Leveraged Finance, Credit Suisse managing director Bob Kricheff explains why conventional analysis techniques are inadequate for leveraged instruments, clearly defines the unique challenges sellers and buyers face, walks step-by-step through deriving essential data for pricing and decision-making, and demonstrates how to apply it. Using practical examples, sample documents, Excel worksheets, and graphs, Kricheff covers all this, and much more: yields, spreads, and total return; ratio analysis of liquidity and asset value; business trend analysis; modeling and scenarios; potential interest rate impacts; evaluating and potentially escaping leveraged finance covenants; how to assess equity (and why it matters); investing on news and events; early stage credit; and creating accurate credit snapshots. This book is an indispensable resource for all investment and underwriting professionals, money managers, consultants, accountants, advisors, and lawyers working in leveraged finance. In fact, it teaches credit analysis skills that will be valuable in analyzing a wide variety of higher-risk investments, including growth stocks.
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3 thoughts on “A Pragmatist’s Guide to Leveraged Finance: Credit Analysis for Bonds and Bank Debt (paperback) (Applied Corporate Finance)”
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Extremely pragmatic,
On the other hand, the author’s clear minimalist style packs an awful lot of valuable experience into a short space. For example, 22 pages (Chapter 13, Structural Issues: Coupons and Chapter 14, Structural Issues: Maturities, Calls and Puts) cover everything you need to skim loan documents and build a quick model of cash flows. A textbook would take at least five times as long, and never get to essential nitty-gritty concepts like pricing grids, clawbacks and applicable high yield discount obligations (AHYDOs). There’s no wasted material here, and almost nothing left out. Another unusual virtue is the book deals explicitly with real-world conditions, like how to skim an indenture or financial statement when you don’t have time to read it carefully, how to do a rapid credit analysis to support a trading decision–what you have to focus on constantly to avoid being blindsided and what dangers you can worry about after the close of trading.
One minor objection is the author appears to have a low opinion of the reader’s intelligence, perhaps based on breaking in new analysts over the years. The end-of-chapter problems are jokes, more like the easiest questions on an SAT reading comprehension exam than anything to test knowledge or reasoning skills. Chapter 15 (Structural Issues: Ranking of Debt) opens with, “You might wonder why this ranking matters.” If you have paid $64.99 for a book on leveraged finance and made it up to page 137 while still wondering why the ranking of your obligation in the issuer’s capital structure matters, you should go home and rethink your life.
If you already know the theory, this book is a great way to prepare to practice. If you don’t know any theory, it could be a dangerous thing.
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|Exactly as advertised,
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|The Title Says It All,
Having been exposed in practice to a lot of the issues discussed in this book may have made me appreciate this book more. However, I am concerned that for those that do not have a good grasp of the theory, this book will lead to a shallow understanding of leveraged finance that so many analyst and recent grads already fall prey to.
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