You are the head of Credit Committee and/or a high caliber corporate banker ?
ALGOSAVE CORPORATE LOAN UNDERWRITING PLATFORM is a tool that lets you, easily check how efficient your current financial covenants are. It will even allow you to check how you could give better covenants to your corporate client. Use ALGOSAVE CORPORATE UNDERWRITING PLATFORM and see how you can secure unique competitive edge.
Download this use case : here.
Let’s take a live example : Heineken enjoys a credit line with a financial covenant whereby NetDebt/Ebitda must stay below 3.5 times at all time.
What if you could Increase Heineken financial flexibility – and even profitability – by granting your VIP client a 3.6 times covenant instead of current 3.5 times ?
1. From a bank’s perspective : what does it mean from a bankruptcy protection point view ?
Algosave high-data granularity shows that, giving this additional leeway to HEINEKEN means that the Bank keeps 87% of the quality of its early warning bankruptcy protection. Indeed, the probability of breach of covenant decreases from 4.9% to 4.3%, hence the “early warning” covenant mechanism keeps [4.3% / 4.9%= ] 87% of its quality.
2. Assuming this level of comfort is fine with the Bank’s credit committee – or alternatively that this is a deal breaker – what is the good news for HEINEKEN ?
First good piece of news : you have helped HEINEKEN increase it maximum net debt capacity by EUR 436 Mln from its current EUR 15,243.
This means – for Heineken CEO – more potential acquisitions, more Capex; for Heineken CFO, more working capital…
Second good piece of news : assuming HEINEKEN 2017 ROIC flies at 9.6% (we have done the math), you can announce your client that this means an additional EUR 42 Mln ROIC.
This means a lot for a lot of people, starting – of course – with HEINEKEN shareholders.
Third REAL good piece of news : you have probably won the trade, by making a difference…
Ask for your private access to ALGOSAVE CORPORATE UNDERWRITING PLATFORM, and see how you can secure unique competitive advantage with your VIP clients.
II – Monitor potential financial-covenant “offenders”
Facing renewed scrutiny from the EBA on covenants-lite high-yield loans as well as punitive IFRS9 treatment of breach of covenants, banks are keen to monitor financial covenants.
With Algosave proprietary Probability of Breach of Covenant, our clients create a live watch-list of potential covenant offenders to
(a) monitor their potential breach and
(b) – more importantly – take action before the other lenders, which – too bad – have not seen the “hit” coming their ways. First in First Served.
Indeed, financial covenants are static pieces of information. They fail to capture the volatility of free cash flows.
By using Algosave Covenant design Platform, where all borrower credit attributes estimated on “live” basis, the probability of breaching those covenants always takes into the market complex information structure
Ask for your private access to ALGOSAVE ISSUER DATABASE and check that out !