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