Loan Origination Simulation

In the simulation, participants will:

• Analyze a potential borrower's business model, industry position, and historical financial statements.

• Build a forward-looking credit model to forecast debt service coverage and leverage ratios.

• Prepare and deliver a compelling pitch to win the borrower's mandate or present a credit case to senior management.

• Structure a comprehensive loan proposal, including amount, term, interest rate, and covenant package.

• Negotiate key terms directly with the opposing borrower or lender team under time pressure.

• Respond dynamically to new information, such as a downturn in the borrower's sales or a change in central bank policy.

• Make strategic trade-offs between deal attractiveness, risk exposure, and profitability targets.

• Finalize a term sheet that balances the needs and constraints of both parties to the transaction.

• Conduct fundamental credit analysis and assess a company's ability to service debt.

• Structure a commercial loan with appropriate pricing, maturity, and covenants.

• Articulate the rationale for a lending decision or borrowing request clearly and persuasively.

• Navigate and negotiate key elements of a loan term sheet.

• Understand how market conditions and competitive dynamics influence loan terms.

• Evaluate the risk-return profile of a loan from both the lender's and borrower's perspectives.

• Appreciate the importance of client relationships and effective communication in deal-making.

• Develop confidence in making and defending high-stakes financial decisions under uncertainty.

1.Team Formation and Role Assignment Participants are divided into teams representing Lending Banks and Borrowing Companies.

** 2. Initial Briefing and Analysis** Each team receives a confidential briefing pack. Lenders get market data and the borrower's financials. Borrowers receive their strategic goals and internal forecasts.

3. Preparation Phase Teams analyze their position, build financial models, and develop their initial strategy and term sheet.

4. Pitching and Mandate Award Lender teams pitch their proposed financing solution to the borrower team. The borrower selects a preferred lender to proceed with exclusive negotiations.

5. Negotiation and Structuring The matched lender and borrower teams negotiate the detailed terms of the loan, adjusting pricing, covenants, and structure based on new scenario information provided by the facilitator.

6. Final Approval and Closing Teams present their final, mutually agreed term sheet, justifying the structure and risk assessment to a simulated credit committee or board of directors.

7. Review and Debrief The facilitator leads a discussion, comparing outcomes across teams, reviewing key learning points, and providing feedback on financial analysis, strategy, and negotiation tactics.

• Who is the target audience for this simulation? This simulation is designed for undergraduate and graduate (MSc, MBA) finance students, as well as professionals in early-career banking, corporate treasury, or credit analyst training programs.

• What are the prerequisites to participate? A basic understanding of corporate finance and financial statements (income statement, balance sheet, cash flow) is recommended. The simulation includes instructional aids to support all participants.

• How long does a typical simulation session last? The core simulation is designed to be completed in 2 to 4 hours, making it ideal for a single workshop or extended classroom session. It can be adapted for shorter or deeper formats.

• Is this an individual or team-based activity? It is primarily a team-based simulation, reflecting the collaborative nature of real-world deal teams. Teams typically consist of 3-5 participants.

• What kind of financial modeling is involved? Participants engage in fundamental credit modeling, focusing on forecasting key ratios like Debt/EBITDA and Interest Coverage. The simulation provides templates and guides to support this analysis.

• Can the simulation scenario be customized? Yes. Industry sectors, company financials, market conditions (e.g., rising interest rates), and specific learning focuses (e.g., leveraged buyout financing, project finance) can be tailored.

• How is participant performance measured and graded? Performance is multi-faceted. The simulator provides data on the financial terms of the closed deal (pricing, risk-adjusted return). Facilitators can also assess the quality of analysis, negotiation strategy, client communication, and final term sheet documentation.

• What makes this simulation different from a standard case study? Unlike a passive case study, this is an active, competitive, and dynamic negotiation. Participants make real-time decisions, face consequences, and adapt their strategy based on the actions of another live team, creating a much more immersive and memorable learning experience.

• Quality and profitability of the final loan structure (interest margin, appropriate covenants).

• Depth and accuracy of the financial due diligence and risk assessment.

• Effectiveness in achieving favorable terms while maintaining a viable deal.

• Clarity and persuasiveness of pitches, negotiations, and final presentations.

• Ability to work effectively within a team under time pressure.