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Join Antonella Puca and Andreas Dal Santo for an update on the guidance to fair value measurement under ASC 820 as applicable to private debt investments, based on the guidance in the AICPA Guide on the Valuation of Portfolio Investments of Venture Capital and Private Equity Funds and Other Investment Companies, and other best practices. Learn about the valuation methodologies that are suitable for private debt investments, and hear the key provisions of the Guide as they apply to private debt. Get practical examples of how to set up a calibration model at the transaction date and how to apply the calibration model to subsequent measurement periods based on Case 13 of the AICPA working draft. In addition, see a demonstration of synthetic ratings and the use of option-pricing models in private debt valuation and examples of how the Black-Scholes-Morton model and binomial lattice models can be applied to the valuation of distressed debt and bonds with option components. This must-attend webinar is a great way to deepen your knowledge on this complex subject.
Program Agenda
Introduction:
Overview of the state of investment in private debt in the US based on the latest data
Definition of fair value and unit of account under ASC 820 and implications for debt valuation
Overview of key sources for the most recent guidance on valuation of private debt investments and insight in the context surrounding the recent activity in this area (AICPA, FASB, IVSC)
Yield and return concepts
Broker quotes and debt valuation
Review of key credit rating systems and descriptions
List of key data sources and reference materials for private debt valuation
Valuation of Private Debt Investments – Calibration at Initial Measurement
Definition of unit of account in debt valuation
Definition of transaction price and discussion of when a transaction can be considered “at arm’s length”
Introduction to calibration in debt valuation
Practical example of how a calibration model is set up for a sample debt investment based on a synthetic credit analysis.
Inputs in the calibration model at inception
BDT modelling for prepayment features at inception
Valuation of Private Debt Investments – Calibration at Subsequent Measurement
Practical example of how a calibration model can be applied to subsequent measurement
Review of inputs, conditions under which inputs need to be updated.
Valuation of Convertible Bonds
Optionality in convertible bonds
Valuation of conversion features
Valuation of Debt with Warrants
Techniques for disaggregation of warrants
Calibration with warrants and equity-like features
Valuation of Non-Performing Distressed Debt
Allocation effects of negotiation
Probability-weighted scenario in distressed debt valuation
Valuation of Debt for the Purpose of Valuing Equity
Other Considerations: Areas of focus in current research.
Learning Objectives
List the provisions in the working draft of the AICPA Guide on the Valuation of Portfolio Investments of Venture Capital and Private Equity Funds and Other Investment Companies as they apply to private debt Investments
Demonstrate how to set up a calibration model base and how to apply calibration in subsequent measurement periods
Explain how to apply synthetic ratings and option pricing models to the valuation of private debt based on the examples that reflect AICPA guidance
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