ICP Islamic Finance - "Conventional" Analysis

This morning we had a working session for our ICP - Islamic Finance with some lawyers, a corporate banker and professors. The two teams presented their analysis of the conventional financing structure of the primary security instruments used to finnace our projects. Under this conventional analysis, we looked at the costs of capital and the associated terms related to these types of paper with the intent of understanding the requirements need to make them Sharia compliant.

We also had great explanation from a senior lawyer regarding the structuring and "asset-based" (versus "asset-backed") nature of nominating (rather than selling) assets under a Special Purpose Vehicle (SPV) in order to comply with the necessary requirements of Islamic finance. We had considered the capital gains implications of a sale leaseback transaction, as well as understood how an asset and capital intense infrastucture project would look similar under an adjusted EV to EBITDAR metric regardless of the off-balance sheet financing that may potentially be required.

We have a solid understanding of the work requirements due before our next meeting in early January (before I fly off for London). We also had an opportunity to fire questions back at the professionals in the room in terms to learn what were the appropriate resources for generating comparables for analysis and benchmarking of our theoretical capital structures based on similar Sharia compliant instruments and current market conditions.

Some of the best advice we got:

• Understand the difference between "asset backed" versus "asset based" and how that affects your ability to issue Sharia compliant instruments
• Be aware of tax implications of capital gains/losses in a sale leaseback transaction
• Like any financial security, understand the key characteristics of seniority and expected return for a sukuk issuance and understand market appetite for these structured products

What Makes Rotman Different? A foray into the world of Business Design

In anticipation of our trip to LBS, Geoff and I have been asking ourselves: “What makes Rotman different?” In discussing this idea, one of the key points at the top of the list was business design. This week, I’ve had the pleasure of attending various events over at Design works where members of a university in Singapore are undergoing certification for Business Design.

On Tuesday, Geoff and I attended a working session with Anita McGahan discussing the evolution of demographics across different geographies and the implications for the future of the health care industry around the globe. With our guests present, we learned a great deal about the specific differences in the Singaporean culture and life style and were impressed by the innovation produced by their ambitious programs.


This exercise was particularly enlightening for me, not only because of my previous work as a Wireless Consultant for RIM in the healthcare communication and process optimization space, but also to learn more about the business design process.

Today, I also attended a talk given by my class mate and president of the Business Design club, Jason Huang, at Design Works for our Singaporean guests. He gave a very inspiring speech about the current state of business design at Rotman as well as a road map to the initiatives he and his team are putting into place to further develop the program at Rotman at the academic and extra-curricular levels. I am particularly impressed by his attitude, aiming to be the top club at Rotman. I think he also has demonstrated that he has the will and ability to execute on these new initiatives, launching business design more prominently into the spotlight.

He also had a great point about case competitions where “the idea isn’t just to try to do well, but more importantly to learn” a sentiment which I would like to echo and I think reflects my personal motivation for participating in various case competitions, including those not necessarily related to my chosen profession.

What is Business Design @ Rotman? Find out for yourself by watching the YouTube video below:

End of Classes, Start of Exams

Last week marked the end of classes for second years and many of us had our first exams today (with the exception of the options class which had their exams last week due to a scheduling conflict with the professor).

Some of my classmates have been thoughful enough to remind me that this is my "last class at Rotman" or my "last exam week at Rotman" as I'll be leaving for exchange in Jan for London Business School. It has started to become more real for me as I think I have found some good accommodation (deposit to be sent tomorrow).

I just wrote the exam for Business Analysis and Valuation tonight (a four hour exam... Yikes!) This week I also have Financial Management on Wednesday evening, Corporate Finance on Thursday and Mergers & Acquisitions on Friday. Thank goodness my ICP in Islamic Finance doesn't have an exam, although it does have work that will stretch over the holidays.

I'm looking forward to the upcoming break, MBA games in Jan and flying out for exchange!

DCF

With summer recruiting coming up for first years in the next few months and with many of our second year finance courses requiring us to do some form of valuation (Corp Fin, Financial Management, Mergers and Acquisitions, Business Analysis and Valuation etc.), I thought it might be useful to post an "academic" quality discounted cash flow model as a reference.

There are some basic comments in the cells which explain some of the assumptions.

Discounted Cash Flow Model

Discounted Cash Flow Guide

For a more advanced version of forecasting (including working capital schedule and depreciation schedule), check out my Chapters LBO model.

Mergers and Acquisitions – Final Project Surprise

Wednesday morning was the presentation date for our final project in M&A. The Wednesday morning class was given the acquirer of Bombardier and told to pitch an appropriate target for the deal. My team had worked very hard to put together a robust deck for our pitch.

While we were told that there would be two “industry judges” coming to judge our presentations, I was quite pleasantly surprised to see two senior Scotia Capital bankers whom I worked with over the summer (one from M&A and one who covered industrials).

It was fantastic to see them again and our class certainly benefited from their comments. Having worked with these two senior bankers at Scotia, I appreciated their comments and learned a great deal from the high caliber of their questions and the responses of my classmates.