AutoSave OFF Orava 3 Corp CreditAnalysis Hardware Hawaii Question.xltx - Compatibility Me Home Insert Draw Page Layout Formulas Data Review View Tell me X Arial v 10 A ' ' = a Wrap Text General TH V Paste BIU .00 v a. A v == = 60 Merge & Center $ % ) Conditional Formatting D23 A F G H 1 J L M N C A X v fx B D E Hawaii Mill Hardware (in US$ Millions) Corporate Credit Analysis 1 2 3 Ratios for 2020 2019 60 50 2020 60 30 ST Debt LT Debt Debt / (Debt + Equity) Approximate Rating 56% BB FCF /Debt Common Stock Retained Earnings 20 55 25 45 FFO/ Debt EBIT / Average Capital EBIT / Interest Expense Interest Expense Tax Expense Net Income Depreciation Exp CF from WC changes CF from Capex Cash on B/S 6 3 10 15 -10 -10 20 5 -1 -1 15 20 -5 25 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 Debt/EBITDA Notes 1) Company has been in business over 100 years 2) 2020 is only the 4th time the company lost money. 3) Company has been a very good customer of the bank for 50 years. You are their main bank 4) Your bank currently has $15 million of credit risk exposure to Hawaii Mill. Total Debt Total Equity Total Capital Average Capital 110 75 185 90 70 160 172.5 Questions 1) What is your LT debt rating for Hawaii Mill? FFO CF Ops 2) In addition to the above ratios, what other factors (pros and cons) would you incorporate into your analysis of Hawaii Mill's credit strength? (factors can be financial, market, econ, etc) FCF EBIT EBITDA 3) Assume you are under the current Coronavirus situation, Hawaii Mill is asking for a 5 year loan for $10 million to shore up its finances. Would you make the loan and why? If so, what interest rate would you charge? What conditions (covenants) would you add to the loan agreement? What additional information would you like to see? Hardware S&P Ratios + OFF Excel File Edit View Insert Format Tools Data Window Help O AutoSave A A O... Corp CreditAnalysis Hardware Hawaii Question.xltx - Compatibility Mode Home Insert Draw Page Layout Formulas Data Review View Tell me X v 10 | A abe General Conditional Formatting LG Format as Tablev DXC Paste .00 BIU a $ %) > 0 Cell Styles Arial V V 60 Ple 026 A X fox B D E F G H 1 J K L M N 0 P Table 1 Key Industrial Financial Ratios, Long-Term Debt Three-year (2002 to 2004) medians A BBB BB B CCC AA 19.5 8.0 4.7 1.2 0.4 AAA 23.8 25.5 203.3 127,6 2.5 3.5 24.6 10.2 6.5 1.9 79.9 48.0 35.9 22.4 11.5 EBIT interest coverage (x) EBITDA interest coverage (x) FFO/total debt (%) Free operating cash flow/total debt (%) Total debt/EBITDA (x) Return on capital (%) Total debt/total debt + equity (%) 0.9 5.0 12.1) 44.5 25.0 17.3 8.3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 2.8 0.4 0.9 1.6 2.2 3.5 5.3 7.9 17.5 13.4 11.3 8.7 27.6 12.4 27.0 28.3 3.2 113.5 37.5 42.5 53.7 75.9 BBB BB 2.5 Table 2-Key Utility Financial Ratios, Long-Term Debt Three-year (2002 to 2004) medians - AA A EBIT interest coverage (x) 4.4 3.1 FFO interest coverage (x) 5.4 4.0 Net cash flow/capital expenditures (%) 86.9 76.2 FFO/average total debt (%) 30.6 18.2 Total debt/Total debt + equity (%) 47.4 53.8 Common dividend payout (%) 78.2 72.3 Return on common equity (%) 11.3 10.8 1.5 2.6 3.8 B 1.3 1.6 32.5 21.6 28 100.2 80.3 18.1 11.5 58.1 70.6 47.2 64.2 68.7 29 30 M 31 32 33 34 35 36 37 38 39 (4.8) 6.0 9.8 4.4 AutoSave OFF Orava 3 Corp CreditAnalysis Hardware Hawaii Question.xltx - Compatibility Me Home Insert Draw Page Layout Formulas Data Review View Tell me X Arial v 10 A ' ' = a Wrap Text General TH V Paste BIU .00 v a. A v == = 60 Merge & Center $ % ) Conditional Formatting D23 A F G H 1 J L M N C A X v fx B D E Hawaii Mill Hardware (in US$ Millions) Corporate Credit Analysis 1 2 3 Ratios for 2020 2019 60 50 2020 60 30 ST Debt LT Debt Debt / (Debt + Equity) Approximate Rating 56% BB FCF /Debt Common Stock Retained Earnings 20 55 25 45 FFO/ Debt EBIT / Average Capital EBIT / Interest Expense Interest Expense Tax Expense Net Income Depreciation Exp CF from WC changes CF from Capex Cash on B/S 6 3 10 15 -10 -10 20 5 -1 -1 15 20 -5 25 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 Debt/EBITDA Notes 1) Company has been in business over 100 years 2) 2020 is only the 4th time the company lost money. 3) Company has been a very good customer of the bank for 50 years. You are their main bank 4) Your bank currently has $15 million of credit risk exposure to Hawaii Mill. Total Debt Total Equity Total Capital Average Capital 110 75 185 90 70 160 172.5 Questions 1) What is your LT debt rating for Hawaii Mill? FFO CF Ops 2) In addition to the above ratios, what other factors (pros and cons) would you incorporate into your analysis of Hawaii Mill's credit strength? (factors can be financial, market, econ, etc) FCF EBIT EBITDA 3) Assume you are under the current Coronavirus situation, Hawaii Mill is asking for a 5 year loan for $10 million to shore up its finances. Would you make the loan and why? If so, what interest rate would you charge? What conditions (covenants) would you add to the loan agreement? What additional information would you like to see? Hardware S&P Ratios + OFF Excel File Edit View Insert Format Tools Data Window Help O AutoSave A A O... Corp CreditAnalysis Hardware Hawaii Question.xltx - Compatibility Mode Home Insert Draw Page Layout Formulas Data Review View Tell me X v 10 | A abe General Conditional Formatting LG Format as Tablev DXC Paste .00 BIU a $ %) > 0 Cell Styles Arial V V 60 Ple 026 A X fox B D E F G H 1 J K L M N 0 P Table 1 Key Industrial Financial Ratios, Long-Term Debt Three-year (2002 to 2004) medians A BBB BB B CCC AA 19.5 8.0 4.7 1.2 0.4 AAA 23.8 25.5 203.3 127,6 2.5 3.5 24.6 10.2 6.5 1.9 79.9 48.0 35.9 22.4 11.5 EBIT interest coverage (x) EBITDA interest coverage (x) FFO/total debt (%) Free operating cash flow/total debt (%) Total debt/EBITDA (x) Return on capital (%) Total debt/total debt + equity (%) 0.9 5.0 12.1) 44.5 25.0 17.3 8.3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 2.8 0.4 0.9 1.6 2.2 3.5 5.3 7.9 17.5 13.4 11.3 8.7 27.6 12.4 27.0 28.3 3.2 113.5 37.5 42.5 53.7 75.9 BBB BB 2.5 Table 2-Key Utility Financial Ratios, Long-Term Debt Three-year (2002 to 2004) medians - AA A EBIT interest coverage (x) 4.4 3.1 FFO interest coverage (x) 5.4 4.0 Net cash flow/capital expenditures (%) 86.9 76.2 FFO/average total debt (%) 30.6 18.2 Total debt/Total debt + equity (%) 47.4 53.8 Common dividend payout (%) 78.2 72.3 Return on common equity (%) 11.3 10.8 1.5 2.6 3.8 B 1.3 1.6 32.5 21.6 28 100.2 80.3 18.1 11.5 58.1 70.6 47.2 64.2 68.7 29 30 M 31 32 33 34 35 36 37 38 39 (4.8) 6.0 9.8 4.4