You are performing credit analysis for a bank and need to evaluate a publicly traded commercial borrowers
Question:
You are performing credit analysis for a bank and need to evaluate a publicly traded commercial borrower’s request for a non-owner occupied commercial real estate loan. If the borrower request is approved, the loan will be secured by a property valued at $22.5 million and loan payments will be repaid using the project’s annual Net Operating Income (NOI) of $1.675 million.
You have been presented with the borrower financial information shown below.
a) Assess the creditworthiness of this borrower using an Altman Z Score.
b) Determine a maximum loan amount if you are only permitted to lend up to 80% of the property value or a loan with a debt coverage ratio (NOI/Annual Loan Payments) greater than 1.25.
(Loan Terms: Equal Monthly Payments of Principal & Interest, 20 Year Amortization, 5% Annual Rate)
2020
Cash 210
Accounts Receivable 20
Inventories 25
Total Assets 1,831
Current Liabilities 120
Long Term Debt 1,112
Total Liabilities 1,275
Book Equity 556
Retained Earnings 120
EBIT 401
Market Value Equity 1,623
Revenue(Sales) 1,889
The Legal Environment of Business A Critical Thinking Approach
ISBN: 978-0132664844
6th Edition
Authors: Nancy K Kubasek, Bartley A Brennan, M Neil Browne