Question 1

For this assignment, you may select any company listed on the Singapore Exchange (https://www2.sgx.com/), except for the six companies used in Case Studies 1 to 6 of this course. The Balance Sheet of the company that you select should be (i) assets-heavy and (ii) has significant outstanding bank loans/bonds.

In this assignment, you are the Point-of-Contact (POC) for your company’s Property, Plant and Equipment Vendor (PPE Vendor). In view of the current global economic uncertainties and rising interest rates, your PPE Vendor is very concerned about your company’s creditworthiness. They have set an ultimatum for you to submit a signed Credit Rating Self-Assessment (with workings in Microsoft Excel format) by 12 noon on 5 September 2022, failing which all future transactions have to be paid on cash terms.

You may make any reasonable assumptions based on business and financial realities i.e., not based on unrealistic assumptions and imaginations.

(a) Using the actual business and financial information and latest available published financial statements of your selected company, construct a Credit Rating Quantification in Microsoft-Excel format to appraise the following Risk

Assessment Factors:

i. Business Strategy Risks
ii. Financial Policy Risks
iii. Execution Risks
iv. Risks Mitigation Factors
Next, present an estimated Credit Rating of your company.

Your PPE Vendor reminded you that the Credit Rating Self-Assessment has to be submitted with screen shots of supporting justifications/calculations (e.g., relevant extracts of or calculations from financial statements, academic publications, industry research or analysts’ reports) for all components of the Risk Assessment Factors covering the industry and selected company, as well as explain the rationale for all weightages used in the Credit Rating Self-Assessment.

(b) When you informed your Chief Executive Officer (CEO) of the PPE Vendor’s ultimatum, he instructed you to ‘hope for the best, but plan for the worst’. Your CEO asked you to prepare a ‘what-if scenario’ in case the company’s lenders demand payment for all outstanding interest-bearing bank loans/bonds within 3 months.

In addition, you are expected to take into consideration the net current assets (or net current liabilities) on the Balance Sheet of your selected company.

Prepare a Written Report to your CEO to appraise how you would raise cash to make payment for all outstanding interest-bearing bank loans/bonds within 3 months.

Your Written Report to the CEO should include the following:

i. Sufficient details of all outstanding interest-bearing bank loans/bonds, current assets and current liabilities on the Balance Sheet of your selected company.

ii. Plausible options to raise cash to make payment for all bank loans/bonds and net current liabilities. In the event that the selected company has net current assets, the amount payable shall be the bank loans/bonds less off
the net current assets.

iii. Plausible options to increase revenue generation and/or to cut costs in order to increase cash and cash equivalents.

iv. Revision to the estimated Credit Rating in (a) above after implementing your recommendations to the CEO. For this part, you are expected to attach the revised Credit Rating Self-Assessment as an Annex to the written report and highlight the salient points in the body of the written report.

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