Calendar of Events

Contingent Liabilities: Three Lines of Defense

10/30/2017, 1:30 PM to 3:30 PM

No location provided

Amy Davis adavis@msbankers.com 601-948-6366

Description:

Contingent Liabilities: Three Lines of Defense


Presented by Richard Hamm
Monday, October 30th, 2017
1:30 pm - 3:30 pm CT

Lines of Defense:

  1. Full disclosure - including simple things like personal financial statement formats and other financial documents that contain clues to other contingent liabilities. 
  2. Developing a secondary or realistic liability which can emerge in the short term - going beyond the face amount of the guarantee (or other item), including: 
    • Understanding the full guarantee structure (guarantee percentage vs. ownership percentage)
    • Underlying cash flow and debt service coverage (DSC) of company or project/property as indicator of potential payment default, then any related collateral and/or reserves.
    • This section provides an assessment example using real estate projects.
  3. Understanding all related parties and the business balance sheet items among the parties
    • Various current receivables
    • Long-term or due from owners and how they arise
    • Other amounts due to owners (liabilities) and various levels or types of subordinated debt or liabilities
    • This section includes examples from financial statements and tax returns, plus issues with corporate "off balance sheet" items such as standby letters of credit and corporate guarantees.

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