casemark/conducting-credit-committee-presentations

Conducting Credit Committee Presentations

Structures credit committee packages with borrower analysis, risk assessment, structuring proposal, and recommendation documentation.

When To Use

• Preparing a new deal for credit committee approval (direct lending, leveraged loan, or syndicated facility)
• Updating an existing credit for annual review, amendment, or waiver request
• Documenting the committee's decision rationale for audit and regulatory files
• Presenting a workout, restructuring, or watchlist escalation to the committee

Inputs To Gather

• Borrower financials: Audited and interim statements, quality-of-earnings adjustments, management projections
• Deal terms: Term sheet or commitment letter, pricing grid, covenants, maturity, amortization schedule
• Industry data: Sector overview, peer comps, relevant market benchmarks (e.g., LCD/Pitchbook leveraged lending stats)
• Collateral / security package: Asset appraisals, lien priority, guarantor analysis
• Third-party reports: Appraisals, environmental, insurance certificates, legal due diligence memos
• Internal risk rating: Proposed rating with scorecard inputs, migration history if existing borrower
• Sponsor / management background: Track record, key-person risk, ownership structure

Workflow

1. Build the Executive Summary

   • One-page overview: borrower name, industry, transaction type (new money / refinancing / amendment), requested facility size, and clear recommendation (approve / approve with conditions / decline).
   • State the investment thesis in 2–3 sentences: why this credit fits the portfolio mandate.

2. Draft the Borrower & Industry Analysis

   • Company overview: business model, revenue mix, customer concentration, competitive positioning.
   • Historical financial performance (3–5 years): revenue, EBITDA, margins, capex, free cash flow.
   • Industry dynamics: cyclicality, regulatory exposure, secular trends. [VERIFY sector-specific risk factors against current market conditions]

3. Present the Financial Model & Projections

   • Base, upside, and downside cases with key assumptions stated explicitly.
   • Credit metrics at each scenario: Total Debt / EBITDA, Senior Secured / EBITDA, Interest Coverage, Fixed Charge Coverage, Debt / Total Capitalization.
   • Sensitivity tables on revenue decline, margin compression, and interest rate changes.

4. Detail the Proposed Structure

   • Facility breakdown: tranches, sizes, pricing (spread + floor), OID, maturity, amortization.
   • Covenant package: financial maintenance covenants (leverage, coverage) with proposed levels and cushion analysis; incurrence covenants and key negative covenant baskets.
   • Security and guaranty package, including intercreditor considerations for multi-tranche deals.
   • Fees: commitment, unused, agency, prepayment penalties.

5. Assess Key Risks & Mitigants

   • Enumerate top 5–7 risks (industry, operational, financial, structural, sponsor, legal/regulatory).
   • For each risk, state the specific mitigant or structural protection.
   • Include downside recovery analysis: estimated enterprise value at stress, coverage of secured debt.

6. Assign Internal Risk Rating

   • Apply the institution's rating methodology; show scorecard inputs and outputs.
   • Compare to external ratings if available (Moody's, S&P, Fitch). [VERIFY rating methodology aligns with current internal policy]
   • Note any overrides or qualitative adjustments with justification.

7. State the Recommendation & Conditions

   • Clear approve / conditional approve / decline recommendation.
   • List all conditions precedent to closing (legal opinions, insurance, environmental sign-off, KYC completion).
   • Specify any portfolio-level considerations: hold size vs. target, industry concentration limits, single-obligor limits. [VERIFY against current portfolio limits and concentration policy]

8. Compile Appendices

   • Detailed financial statements and spreads
   • Organizational chart and ownership structure
   • Comparable transaction / comp table
   • Draft term sheet or markup summary
   • Covenant compliance projections over the facility life

Output

A complete credit committee package containing:

• Executive summary (1 page) with clear recommendation
• Borrower & industry analysis (2–4 pages)
• Financial model summary with scenario analysis and sensitivity tables
• Structuring memo covering terms, covenants, and security
• Risk matrix mapping each identified risk to its mitigant
• Internal risk rating worksheet
• Appendices with supporting data and documentation

Format the package to match the institution's standard credit memo template. Use consistent units ($ in millions unless otherwise noted), and label all EBITDA figures as to whether they are reported, adjusted, or pro forma.

Quality Checks

• [ ] Every financial metric ties back to the sourced financial statements or QoE report
• [ ] Base, upside, and downside scenarios use clearly stated and differentiated assumptions
• [ ] Covenant cushion analysis shows headroom at each projection period under the base case
• [ ] Risk section addresses at minimum: industry, leverage, cash flow, collateral, and sponsor/management risk
• [ ] Internal risk rating is calculated per current policy with any overrides documented
• [ ] Hold size and concentration are checked against portfolio limits [VERIFY current limits]
• [ ] All [VERIFY] items have been resolved or flagged for committee discussion
• [ ] No inferred data is presented as confirmed — assumptions are labeled explicitly