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DEBT TRANSFER PRICING  

Implied Credit Profile

A complete and accurate assessment of the credit worthiness of the Issuer as a stand-alone entity is a vital first step in assessing its current and future capacity for debt and interest expense. GCA utilizes a range of credit rating methodologies, including those employed by major Nationally Recognized Statistical Ratings Organizations ("NRSRO's”), including Moody's Investor Services, Standard & Poor's Ratings Group, Fitch Ratings, DBRS Ltd, and Kroll Bond Rating Agency.

GCA prepares an Implied Credit Profile that provides a detailed explanation as to how the indicative credit ratings were determined based on NRSRO methodologies. The report would include:

  • Executive Summary / Rationale for Implied Credit Profile / Process
  • An overview of the industry(ies) and competitive analysis
  • Business overview by segment
  • Management strategy, financial policy, including goals and objectives, dividend policy, acquisitions
  • Financial Profile
    • 3-year historical financial profile; forecast assumptions; current year forecast; and, if available, a 3-year projection; full financials for all years.
  • Financial Flexibility
    • Liquidity, capex flexibility, maturity profile
  • Financial Analysis
    • Profitability discussion and ratios
    • Capital structure discussion and ratios
    • Cash flow discussion and ratios
    • Competitive analysis (ratio comparison of rated comparables, as appropriate).

In instances where the Issuer may not actually currently exist in corporate form, GCA will need to assess the impact of fully loading the Issuer with the costs of establishing and running a unified corporate entity. In so doing, and as part of its due diligence, GCA will require that an organizational/key issues matrix be completed by the Issuer to inform our judgment as to the Issuer's ability to both operate and issue debt as a stand-alone enterprise.

For credits determined to be low investment grade quality, consideration will be given to the necessity of "notching” the credit rating applicable to long term debt that would be structurally subordinated to senior secured bank debt.

 
 
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