TOOL B1
This tool is to help you identify and prioritize key players which must be analyzed in the course of a credit assessment process.
Any party against whom the bank/investor has direct or indirect legal recourse either on first demand or conditionally
Borrower/Issuer/Swap Counterparty
The party whom the bank lends money to or makes available a facility or provides a derivatives product, who issues a bond, or on whose behalf the bank/investor makes a commitment.
Guarantor
A party who has agreed to be liable for the debts of the borrower/issuer upon default or other conditions specified in the guarantee agreement
Hedge/CDS Counterparty
The seller or provider of a Credit Default Swap who is contractually committed to make a payment in an event of default of the borrower/issuer.
Other Contractual Parties
Other parties obliged to make a financial payment either to the borrower/issuer or directly to the bank/investor, which has the effect to reduce the bank/investor’s overall credit risk. For example:
• Security assignments & escrowing of off-take agreements
• Security assignment & escrowing of insurance proceeds
• Security assignment of accounts receivables from key clients
• Security assignments of performance obligations.
Any other party with whom the bank/investor does not have a direct legal relationship but whose financial health has a direct or indirect impact on the ability of the legal counterparties to complete its debt service obligation throughout the life of the credit exposure
Parent Company/ Shareholders
Ability & willingness of the parent and/or other shareholders (including minority interests) to support the legal counterparties, and/or the extent to which the parent and/or shareholders may be detrimental to the credit profile of the legal counterparties.
The Consolidated Group
• Assess the extent to which other entities or business divisions within the broader group could potentially be credit positive or negative for the legal counterparties.
• Identify business areas within the group that demonstrate either a strong or a particularly weak performance
• Assess whether there are any associates or JVs that are not consolidated and which may have a potential impact on the legal counterparties.
Major Supppliers, Buyers, Off-takers
Assess the extent to which there is any concentration and/or dependence.
Other parties
• Government(s): assess whether Sovereign actions may add to or mitigate credit risk.
• Other: e.g. target company in an acquisition; key tenants, etc.
