“The author applies his vast market experience to detail the underlying tenets of credit analysis in a user-friendly fashion. This is certain to become the ‘go to’ book for all participants in the leveraged finance market!”
—Pat Dyson, Managing Director, UBS O’Connor
“Bob Kricheff’s extensive experience in leveraged finance makes him the perfect person to write what is a very helpful and easy-to-use book on credit analysis. He blends the technical aspects, along with the practical, to provide the reader with a thorough understanding of how analysts do their jobs.”
—Terrence J. Mullen, CFA, Group Head of Public Research, Allstate Investments, LLC
“This book belongs on the bookshelf of anyone engaged in or considering investing in leveraged finance. It is a must-read for new analysts on the buy side and the sell side of the high yield marketplace. I cannot think of anyone, other than Bob, who is better positioned with deep knowledge and professional experience to pen this book.”
—Linda Carter, Portfolio Manager and Vice President, Eaton Vance Investment Managers
“Bob has been involved in a variety of roles in the high yield market since the market’s infancy in the 1980s. This book is an excellent resource for beginners who are trying to learn the intricacies of the high yield market as well as for experienced professionals looking to refine their credit skills. I found the book well written and I highly recommend it.”
—Richard J. Lindquist, Managing Director, Morgan Stanley Investment Management
Years ago I worked in the field of "junk" bonds, including leveraged buyouts. Obviously, the market has changed drastically since then, mainly in the use of computer models and math. So this book came as a bit of a revelation! Fortunately, it is not really difficult, though definitely not a "quick" read. Perhaps it's just as useful as a reference. Subjects like liquidily, fluctuating interest rates, computer models, are all handled with apparent ease by the author, obviously a real expert in this somewhat esoteric subject. By the time I finished this book (including re-reading many parts due to my own lack of expertise) I felt as if I was more than a novice in the subject. So I would recomment this for students, beginners, as well as pros who may need as "updating" on the massive and very newsworthy, not to mention intellectually challenging, subject!
I think the title sums up the book perfectly. As someone who works in the credit world but is also working to develop a credit research skill set, I can say that this book connects the dots between theoretical studies and real world application. The book walks the reader through the process of taking financial statements as they are provided by a company and then extrapolating the data necessary to derive key metrics that are used in the marketplace today to value debt securities. The author combines fundamental research with real world scenarios to give the reader an excellent insight into how and why deals are being done. All in all a very enjoyable and informational read.
I am a senior analyst in a buy-side leveraged finance shop and believe the book does a great job of outlining the process of credit analysis and bond assessment for the junior analyst. I read the book to see whether it made sense as a training tool for our new junior analysts and I believe strongly that it does. In addition, while I didn't think I was the target market, I found the book to be an interesting read and a worthwhile look into the mental systems used by a long-time analyst. I definitely took away a few ideas on how I might alter my own procedures for the better. Mr Kricheff lays out the nuts and bolts of who the players are in the market, then moves on to the issuance of a new piece of debt and shows the new analyst what pieces of information are important to look for and even how to prioritize between different pieces of information. The book lays out the basics of what a bond is, how they are priced and how to analyze the structure of the security. He looks at how to analyze the underlying company. He covers what he thinks are the two first items to consider (liquidity and asset coverage) and then moves on to discuss which financial measures are important and why; what are the important covenants and how can one use them. How much modeling do you need to do, how can you begin the process and how in-depth should a model realistically be? How can you use your model to adapt to changing newsflow or market pricing? What are some other pieces of information used by an analyst to decide between competing investment choices? These are all of the types of things covered in the book. The book does not target the senior analyst, but if one were interested in reading about another analyst's process, you could find the book interesting. For the new junior analyst, I think the book could accelerate the learning process significantly and give the new analyst a significant leg up in starting his/her career.
Kricheff's book is an excellent introduction to leveraged finance analysis and suitable for aspiring leveraged finance analysts, traders, sales people as well as both origination and syndicate bankers. The benefit this book brings is in the time it will save a beginner by highlighting which key sections of an offering memorandum should be read and which credit metrics to look at first before taking a deeper dive. In addition to a great summary of ranking of debt, covenants and relative value, I found chapters 24 and 25 bring the content of the book together by outlining how to consolidate the analysis into a credit tear sheet and how to think about the investment decision process. Personally, I will consider using this book as part of a training program for graduate staff. Beyond this book, the best use of time will then be to practice practice practice, as credit analysis is a very practical rather than academic endeavour.
This book ignores a lot of the theoretical underpinnings and build-up many textbooks try to do and goes straight to what one needs to know in practice. I typically favor books with lots of theory and models, but there is some benefit to a book like this. I do admire the attempt to cram the important points into a few pages, which makes these usually boring topics (e.g., covenants) much more digestible.
Having been exposed in practice to a lot of the issues discussed in this book may have made me appreciate this book more. However, I am concerned that for those that do not have a good grasp of the theory, this book will lead to a shallow understanding of leveraged finance that so many analyst and recent grads already fall prey to.
I haven't put my money where my mouth is yet, but I have an interest in the area - which is arguably speculation played at the highest levels. I'm still below dabbler level but have done a bit of prior reading (several articles and one serious text book), and have discovered this work by Robert Kricheff to come in spot on to what I was looking for: how to plug and chug an analysis . . . or skim data for a quickie.
Inclusive for the beginner, and apparently advanced enough to be somewhat instructive to a professional - this pragmatist's guide to leveraged finance will provide PRACTICAL instruction for credit analysis over the spectrum of scenarios (the about high grade to the highly distressed subject). Copious practical examples. No theory.
Personally, I don't trust my gut enough yet and will have to add some structured education. (There are sharks in these waters and I have no theoritical education). But technically, "A Pragmatist's Guide . . ." has made me feel competent. Very readable and followable. I see no reason why many of the techniques here cannot immediately be used to provide an edge in the making of simple trade decisions.
The first thing to know about this book is the title is completely honest. This is a "pragmatist's" guide, there is zero theory, zero context, just clear instruction on how to do the job of evaluating and managing high yield bonds and tradable bank loans. There is no mention of models of interest rate evolution, option adjusted spread, quantitative models of credit, credit derivatives or statistical analysis. The author assumes you will do your analysis by typing formulae into a spreadsheet: no Bloomberg, no Monte Carlo package, no Python code; and no mention of things like sensitivity analysis, documentation or testing. If you want that sort of thing, you will do much better with Quantitative Credit Portfolio Management, Leveraged Finance or Portfolio Risk Analysis.
On the other hand, the author's clear minimalist style packs an awful lot of valuable experience into a short space. For example, 22 pages (Chapter 13, Structural Issues: Coupons and Chapter 14, Structural Issues: Maturities, Calls and Puts) cover everything you need to skim loan documents and build a quick model of cash flows. A textbook would take at least five times as long, and never get to essential nitty-gritty concepts like pricing grids, clawbacks and applicable high yield discount obligations (AHYDOs). There's no wasted material here, and almost nothing left out. Another unusual virtue is the book deals explicitly with real-world conditions, like how to skim an indenture or financial statement when you don't have time to read it carefully, how to do a rapid credit analysis to support a trading decision--what you have to focus on constantly to avoid being blindsided and what dangers you can worry about after the close of trading.
One minor objection is the author appears to have a low opinion of the reader's intelligence, perhaps based on breaking in new analysts over the years. The end-of-chapter problems are jokes, more like the easiest questions on an SAT reading comprehension exam than anything to test knowledge or reasoning skills. Chapter 15 (Structural Issues: Ranking of Debt) opens with, "You might wonder why this ranking matters." If you have paid $64.99 for a book on leveraged finance and made it up to page 137 while still wondering why the ranking of your obligation in the issuer's capital structure matters, you should go home and rethink your life.
If you already know the theory, this book is a great way to prepare to practice. If you don't know any theory, it could be a dangerous thing.
I read this book cover to cover 2c and I was really impressed by the way it was so easy to read and the way it was laid out. I have been a stock broker and financial adviser for more than 3 decades. I am retired now, however, I don't know if I would be capable of putting a book like this together.
With that being said, this book can be very 'constructive' to one's portfolio. It can also be very 'destructive' to one's portfolio.
NO NEW INVESTOR SHOULD EVER DABBLE INTO LEVERAGING!!! Doesn't matter if you are selling short, currency, penny stocks, or leveraging bonds! These are not tools for the everyday investor. [not to make a j0ke, but this why day-traders were coming to work with guns].
If you have a Series 7 & 63, then you know what I am talking about. If you don't know what a Series 7 & 63 are, please contact a stock broker or hire a financial adviser and discuss this with them.
With that in mind, it is always important to meet with your adviser in person--not just on the phone. Both a stock broker and financial adviser should be licensed by the SEC and have documentation to provide you.
You can't do better than Mr. Kricheff's book if you want to prepare for a career in leveraged finance. You will find it's a refreshing departure from purely abstract financial theory and that it provides you with some truly pragmatic tools for excelling in finance. It is also a great desk reference for those already working in the business.
There is no substitute for actual work experience, not matter what field you are in. In his book, Mr. Kricheff deftly compiles and delivers to you what he has learned over his long and successful career in leveraged finance. He blends academic theory with practical real world examples across a breadth of situations -- from pricing risk on steady high quality credits to distressed restructuring scenarios. He's done it all and does an excellent job making complex concepts easy to understand for beginners, yet comprehensive enough to appeal to professionals.
I write this review coming from a background of having majored in economics and finance, and litigated numerous financial product lawsuits. So I have some background. In my opinion this is a truly excellent book for the person just getting into leveraged finance, but who wants to know its various aspects in some depth. This book addresses essentially all of the issues, and addresses them well. The only noticeable omission (and actually a beneficial omission) is the higher mathematics. Once beyond the knowledge of the process, leveraged finance can easily become the domain of the "quants", those so deeply immersed in mathematics that one needs a Ph.D. to follow the discourse. Frankly, this book is better without such intense mathematics for it would leave the reader at a total loss. I won't try to enumerate all the subjects covered in the book, the index shown will do that. What I will do is say that this book does its job with great readability and thoroughness. Highly recommended to those with an interest in this area, not merely laymen, but finance and economics students as well.
Product Details :
Hardcover: 288 pages
Publisher: FT Press; 1 edition (March 5, 2012)
Language: English
ISBN-10: 0132855232
ISBN-13: 978-0132855235
Product Dimensions: 6.3 x 1 x 9.2 inches
More Details about A Pragmatist's Guide to Leveraged Finance: Credit Analysis for Bonds and Bank Debt, Applied Corporate Finance 1st edition
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