《債券市場：分析與策略（第七版）》Ch21

Chapter21

CorporateBondCreditAnalysis

21-1Copyright?2010PearsonEducation,Inc.PublishingasPrenticeHallLearningObjectivesAfterreadingthischapter,youwillunderstandthemajorareasofbondcreditanalysis:covenants,collateral,andabilitytopaythereasonwhycovenantsmustbeanalyzedwhatfactorsareconsideredinevaluatingtheabilityofanissuertosatisfyitsobligationswhatfactorsareconsideredinassessingacompany’sbusinessriskwhyananalysisofacompanymustbelookedatrelativetotheindustryinwhichitoperatesthereasonscorporategovernanceriskisimportantandhowitcanbemitigatedkeyfinancialratiostherelationshipbetweencorporatebondcreditanalysisandcommonstockanalysis21-2Copyright?2010PearsonEducation,Inc.PublishingasPrenticeHallOverviewofBondCreditAnalysisIntheanalysisofthedefaultriskofacorporatebondissuerandspecificbondissues,therearethreeareasthatareanalyzedbybondcreditanalysts.Thesethreeareasare:theprotectionsaffordedtobondholdersthatareprovidedbycovenantslimitingmanagement’sdiscretionthecollateralavailableforthebondholdershouldtheissuerfailtomaketherequiredpaymentstheabilityofanissuertomakethecontractualpaymentstobondholders21-3Copyright?2010PearsonEducation,Inc.PublishingasPrenticeHallOverviewofBondCreditAnalysis

(continued)AnalysisofCovenantsAnanalysisoftheindentureispartofacreditreviewofacorporation’sbondissue.Theindentureprovisionsestablishrulesforseveralimportantareasofoperationforcorporatemanagement.Theseprovisionsaresafeguardsforthebondholder.Indentureprovisionsshouldbeanalyzedcarefully.Therearetwogeneraltypesofcovenants.Affirmativecovenantscalluponthecorporationtomakepromisestodocertainthings.Negativecovenants,alsocalledrestrictivecovenants,requirethattheborrowernottakecertainactions.Thereareaninfinitevarietyofrestrictionsthatcanbeplacedonborrowersintheformofnegativecovenants.21-4Copyright?2010PearsonEducation,Inc.PublishingasPrenticeHallOverviewofBondCreditAnalysis

(continued)AnalysisofCovenantsSomeofthemorecommonrestrictivecovenantsincludevariouslimitationsonthecompany’sabilitytoincurdebt.Bondholdersmaywanttoincludelimitsontheabsolutedollaramountofdebtthatmaybeoutstandingormayrequiresometypeoffixedchargecoverageratiotest.Thetwomostcommontestsarethemaintenancetestandthedebtincurrencetest.Themaintenancetestrequirestheborrower’sratioofearningsavailableforinterestorfixedchargestobeatleastacertainminimumfigureoneachrequiredreportingdate(suchasquarterlyorannually)foracertainprecedingperiod.21-5Copyright?2010PearsonEducation,Inc.PublishingasPrenticeHallOverviewofBondCreditAnalysis

(continued)AnalysisofCovenantsThedebtincurrencetestonlycomesintoplaywhenthecompanywishestodoadditionalborrowing.Inordertotakeonadditionaldebt,therequiredinterestorfixedchargecoveragefigureadjustedforthenewdebtmustbeatacertainminimumlevelfortherequiredperiodpriortothefinancing.Debtincurrencetestsaregenerallyconsideredlessstringentthanmaintenanceprovisions.Therecouldalsobecashflowtests(orcashflowrequirements)andworkingcapitalmaintenanceprovisions.21-6Copyright?2010PearsonEducation,Inc.PublishingasPrenticeHallOverviewofBondCreditAnalysis

(continued)AnalysisofCovenantsSomeindenturesmayprohibitsubsidiariesfromborrowingfromallothercompaniesexcepttheparent.Restrictedsubsidiariesarethoseconsideredtobeconsolidatedforfinancialtestpurposes;unrestrictedsubsidiaries(oftenforeignandcertainspecial-purposecompanies)arethoseexcludedfromthecovenantsgoverningtheparent.Often,subsidiariesareclassifiedasunrestrictedinordertoallowthemtofinancethemselvesthroughoutsidesourcesoffunds.21-7Copyright?2010PearsonEducation,Inc.PublishingasPrenticeHallOverviewofBondCreditAnalysis

(continued)AnalysisofCollateralAcorporatedebtobligationcanbesecuredorunsecured.Inthecaseoftheliquidationofacorporation,proceedsfromabankruptcyaredistributedtocreditorsbasedontheabsolutepriorityrule.Whatistypicallyobservedisthatthecorporation’sunsecuredcreditorsmayreceivedistributionsfortheentireamountoftheirclaimandcommonstockholdersmayreceivesomedistribution,whilesecuredcreditorsmayreceiveonlyaportionoftheirclaim.Theclaimpositionofasecuredcreditorisimportantintermsofthenegotiationprocess.21-8Copyright?2010PearsonEducation,Inc.PublishingasPrenticeHallOverviewofBondCreditAnalysis

(continued)AssessinganIssuer’sAbilitytoPayTheabilityofanissuertogeneratecashflowgoesconsiderablybeyondthecalculationandanalysisofamyriadoffinancialratiosandcashflowmeasuresthatcanbeusedasabasicassessmentofacompany’sfinancialrisk.Anevaluationofanissuer’sabilitytopayinvolvesanalysisofbusinessriskcorporategovernanceriskfinancialrisk21-9Copyright?2010PearsonEducation,Inc.PublishingasPrenticeHallAnalysisofBusinessRiskBusinessriskisdefinedastheriskassociatedwithoperatingcashflows.Operatingcashflowsarenotcertainbecausetherevenuesandtheexpenditurescomprisingthecashflowsareuncertain.Ananalysisofindustrytrendsisimportantbecauseitisonlywithinthecontextofanindustrythatcompanyanalysisisvalid.Industryconsiderationshouldbeconsideredinaglobalcontext.Theneedformanycompaniestobecomegloballycompetitiveincreasesasthebarrierstointernationaltradearebrokendown.21-10Copyright?2010PearsonEducation,Inc.PublishingasPrenticeHallAnalysisofBusinessRisk(continued)Ithasbeensuggestedthatthefollowingareaswillprovideacreditanalystwithasufficientframeworktoproperlyinterpretacompany’seconomicprospects:economiccyclicalitygrowthprospectsresearchanddevelopmentexpensescompetitionsourcesofsupplydegreeofregulationlaborThesegeneralareasencompassmostoftheareasthattheratingagencieshaveidentifiedforassessingbusinessrisk.21-11Copyright?2010PearsonEducation,Inc.PublishingasPrenticeHallAnalysisofBusinessRisk(continued)Oneofthefirstareasofanalysisisinvestigatinghowcloselytheindustryfollowsgrossdomesticproduct(GDP)growth.Thisisdoneinordertounderstandtheindustry’seconomiccyclicality.Relatedtotheanalysisofeconomiccyclicalityarethegrowthprospectsoftheindustry.Thisrequiresananalysisastowhethertheindustry’sgrowthisprojectedtoincreaseandthereafterbemaintainedatahighlevelorisitexpectedtodecline.Toassessthegrowthprospects,acreditanalystwillhavetoinvestigatethedependenceonresearchanddevelopment(R&D)expendituresformaintainingorexpandingthecompany’smarketposition.21-12Copyright?2010PearsonEducation,Inc.PublishingasPrenticeHallAnalysisofBusinessRisk(continued)Competitionisbasedonavarietyoffactorsanddependsonthenatureoftheindustry.Thebasisforcompetitiondetermineswhichfactorsareanalyzedforagivencompany.Withrespecttopricing,thecreditanalystwilllookatthemarketstructureofanindustry(e.g.,unregulatedmonopoly,oligopoly,etc.)becauseofitsimplicationsonpricingflexibility.Moreover,marketstructureisimportantifitbearsononeoftheotherindustryfactors:sourcesofsupply.Withrespecttoregulation,thefocusshouldbeonthedirectionofregulationanditspotentialimpactonthecurrentandprospectiveprofitabilityofthecompany.21-13Copyright?2010PearsonEducation,Inc.PublishingasPrenticeHallAnalysisofBusinessRisk(continued)Withrespecttoitsanalysisofacompany’sglobalrisk,thereisaparticularrisktothecompanythatthegovernmentmaychangetherulesthroughsuchitemsasimport/exportrestrictionsdirectinterventioninservicequalityorlevelsredefiningboundariesofcompetitionalteringexistingbarrierstoentrychangingsubsidieschangingantitrustlegislationchangingthepercentageofforeignownershipparticipationchangingtermstoconcessioncontractsforutilitiesAkeycomponentinthecoststructureofanindustryislabor.Inanalyzingthelaborsituation,thecreditanalystwillexamineiftheindustryisheavilyunionized.Innonunionizedcompanies,thecreditanalystwilllookattheprospectofpotentialunionization.21-14Copyright?2010PearsonEducation,Inc.PublishingasPrenticeHallCorporateGovernanceRiskCorporategovernanceissuesinvolvetheownershipstructureofthecorporationthepracticesfollowedbymanagementpoliciesforfinancialdisclosureTheeagernessofcorporatemanagementtopresentfavorableresultstoshareholdersandthemarkethasbeenamajorfactorinseveralofthecorporatescandalsinrecentyears.Chiefexecutiveofficers,chieffinancialofficers,andtheboardofdirectorsarebeinghelddirectlyaccountablefordisclosuresinfinancialstatementsandothercorporatedecisions.Theunderlyingeconomictheoryregardingmanyofthecorporategovernanceissuesistheprincipal-agencyrelationshipbetweentheseniormanagersandtheshareholdersofcorporations.Theagent,acorporation’sseniormanagement,ischargedwiththeresponsibilityofactingonbehalfoftheprincipal,theshareholdersofthecorporation.21-15Copyright?2010PearsonEducation,Inc.PublishingasPrenticeHallCorporateGovernanceRisk(continued)Therearemechanismsthatcanmitigatethelikelihoodthatmanagementwillactinitsownself-interest.Themechanismsfallintotwogeneralcategories.Thefirstmechanismistomorestronglyaligntheinterestsofmanagementwiththoseofshareholders.Thiscanbeaccomplishedbygrantingmanagementaneconomicallymeaningfulequityinterestinthecompany.Also,managercompensationcanbelinkedtotheperformanceofthecompany’scommonstock.21-16Copyright?2010PearsonEducation,Inc.PublishingasPrenticeHallCorporateGovernanceRisk(continued)Thesecondmechanism(thatcanmitigatethelikelihoodthatmanagementwillactinitsownself-interest)isbymeansofthecompany’sinternalcorporatecontrolsystems,whichcanprovideawayforeffectivelymonitoringtheperformanceanddecision-makingbehaviorofmanagement.Whathasbeenclearincorporatescandalsisthattherewasabreakdownoftheinternalcorporatecontrolsystemsthatleadtocorporatedifficultiesandthedestructionofshareholderwealth.Becauseoftheimportantroleplayedbytheboardofdirectors,thestructureandcompositionoftheboardarecriticalforeffectivecorporategovernance.ThekeyistoremovetheinfluenceoftheCEOandseniormanagementonboardmembers.21-17Copyright?2010PearsonEducation,Inc.PublishingasPrenticeHallCorporateGovernanceRisk(continued)Severalorganizationshavedevelopedservicesthatassesscorporategovernanceandexpresstheirviewintheformofarating.TheirratingstakeintoconsiderationfourkeyelementsevaluatedbyS&P:theownershipstructureandexternalinfluencesshareholderrightsandstakeholderrelationstransparency,disclosure,andauditboardstructureandeffectivenessSeeOverhead21-19formoreinformationonthesefourelements.21-18Copyright?2010PearsonEducation,Inc.PublishingasPrenticeHallStandard&Poor’s,CorporateGovernanceEvaluations&Scores1.OwnershipstructureandexternalinfluencesTransparencyofownershipstructureConcentrationandinfluenceofownershipandexternalstakeholders3.Transparency,disclosure,andauditContentofpublicdisclosureTimingofandaccesstopublicdisclosureAuditprocess2.ShareholderrightsandstakeholderrelationsShareholdermeetingandvotingproceduresOwnershiprightsandtakeoverdefensesStakeholderrelations4.BoardstructureandeffectivenessBoardstructureandindependenceRoleandeffectivenessoftheboardDirectorandseniorexecutivecompensation21-19Copyright?2010PearsonEducation,Inc.PublishingasPrenticeHallCorporateGovernanceRisk(continued)Inadditiontocorporategovernance,creditanalystslookatthequalityofmanagementinassessingacorporation’sabilitytopay.Inassessingmanagementquality,Moody’striestounderstandthebusinessstrategiesandpoliciesformulatedbymanagement.ThefactorsMoody’sconsidersare:strategicdirectionfinancialphilosophyconservatismtrackrecordsuccessionplanningcontrolsystems21-20Copyright?2010PearsonEducation,Inc.PublishingasPrenticeHall

FinancialRiskHavingachievedanunderstandingofacorporation’sbusinessriskandcorporategovernancerisk,theanalystisreadytomoveontoassessingfinancialrisk.Thisinvolvestraditionalratioanalysisandotherfactorsaffectingthefirm’sfinancing.Someofthemoreimportantfinancialratiosare:interestcoverage,leverage,cashflow,netassets,andworkingcapital.Oncetheseratiosarecalculated,itisnecessarytoanalyzetheirabsolutelevelsrelativetothoseoftheindustry.21-21Copyright?2010PearsonEducation,Inc.PublishingasPrenticeHall

FinancialRisk(continued)Beforeperformingananalysisofthefinancialstatement,theanalystmustdetermineiftheindustryinwhichthecompanyoperateshasanyspecialaccountingpractices,suchasthoseintheinsuranceindustry.Ifso,ananalystshouldbecomefamiliarwithindustrypractices.Moreover,theanalystmustreviewtheaccountingpoliciestodeterminewhethermanagementisemployingliberalorconservativepoliciesinapplyinggenerallyacceptedaccountingprinciples(GAAP).Sincehistoricaldataareanalyzed,theanalystshouldrecognizethatcompaniesadjustprioryears’resultstoaccommodatediscontinuedoperationsandchangesinaccountingthatcanhideunfavorabletrends.Thiscanbedonebyassessingthetrendsforthecompany’sunadjustedandadjustedresults.21-22Copyright?2010PearsonEducation,Inc.PublishingasPrenticeHall

FinancialRisk(continued)InterestCoverageAninterestcoverageratiomeasuresthenumberoftimesinterestchargesarecoveredonapretaxbasis.Typically,interestcoverageratiosthatareusedandpublishedarepretaxasopposedtoafter-taxbecauseinterestpaymentsareapretaxexpense.Pretaxinterestcoverageratioiscalculatedbydividingpretaxincomeplusinterestchargesbytotalinterestcharges.Thehigherthisratio,thelowerthecreditrisk,allotherfactorsthesame.Acalculationofsimplepretaxinterestcoveragewouldbemisleadingiftherearefixedobligationsotherthaninterestthataresignificant.Inthiscase,amoreappropriatecoverageratiowouldincludetheseotherfixedobligations,andtheresultingratioiscalledafixedchargecoverageratio.21-23Copyright?2010PearsonEducation,Inc.PublishingasPrenticeHall

FinancialRisk(continued)LeverageWhilethereisnoonedefinitionforleverage,themostcommononeistheratiooflong-termdebttototalcapitalization.Ifthereisahigherlevelofdebtthenahigherpercentageofoperatingincomemustbeusedtosatisfyfixedobligations.Inanalyzingahighlyleveragedcompany(i.e.,acompanywithahighleverageratio),themarginofsafetymustbeanalyzed.Themarginofsafetyisdefinedasthepercentagebywhichoperatingincomecoulddeclineandstillbesufficienttoallowthecompanytomeetitsfixedobligations.Recognitionmustbegiventothecompany’soperatingleases.21-24Copyright?2010PearsonEducation,Inc.PublishingasPrenticeHall

FinancialRisk(continued)CashFlowCashflowanalysisisthesinglemostcriticalaspectofallcreditratingdecisions.Ittakesonaddedimportanceforspeculative-gradeissuers.Thestatementofcashflowsisrequiredtobepublishedinfinancialstatementsalongwiththeincomestatementandbalancesheet.Thestatementofcashflowsisasummaryoveraperiodoftimeofacompany’scashflowsbrokenoutbyoperating,investing,andfinancingactivities.Analystsreformatthisinformation,combiningitwithinformationfromtheincomestatementtoobtainwhattheyviewasabetterdescriptionofthecompany’sactivities.21-25Copyright?2010PearsonEducation,Inc.PublishingasPrenticeHall

FinancialRisk(continued)CashFlowS&Pcalculateswhatitreferstoasfundsfromoperations(definedasnetincomeadjustedfordepreciationandothernoncashdebitsandcredits).Operatingcashflowisfundsfromoperationsreducedbychangesintheinvestmentinworkingcapital(currentassetslesscurrentliabilities).SubtractingcapitalexpendituresgiveswhatS&Pdefinesasfreeoperatingcashflow.Itisfromthiscashflowthatdividendsandacquisitionscanbemade.Deductingcashdividendsfromfreeoperatingcashflowgivesdiscretionarycashflow.Adjustingdiscretionarycashflowformanagerialdiscretionarydecisionsforacquisitionofothercompanies,thedisposalofassets(e.g.,linesofbusinessorsubsidiaries),andothersourcesorusesofcashgivesprefinancingcashflow.21-26Copyright?2010PearsonEducation,Inc.PublishingasPrenticeHall

FinancialRisk(continued)NetAssetsAfourthimportantratioisnetassetstototaldebt.Intheanalysisofthisratio,considerationshouldbegiventotheliquidationvalueoftheassets.Liquidationvaluewilloftendifferdramaticallyfromthevaluestatedonthebalancesheet.Considerationshouldbegiventoseveralotherfinancialvariablesincludingintangibleassets,pensionliabilities,andtheageandconditionoftheplant.21-27Copyright?2010PearsonEducation,Inc.PublishingasPrenticeHall

FinancialRisk(continued)WorkingCapitalWorkingcapitalisdefinedascurrentassetslesscurrentliabilities.Workingcapitalisconsideredaprimarymeasureofacompany’sfinancialflexibility.Othersuchmeasuresincludethecurrentratio(currentassetsdividedbycurrentliabilities)andtheacidtest(cash,marketab