Reference no: EM13135401

Section A: Background 
You are an employee of MSL Bank, a major Australian financial institution. Currently employed in MSL Bank"s Institutional Banking division you are part of a small team responsible for managing the bank's relationships with major Australian corporations. Such relationships can include providing lending facilities, trade finance, money market and foreign exchange services, transaction facilities including payroll and electronic banking services for the corporation's client relationships. From interest income and fees for service the institutional banking division is able to generate a healthy contribution to MSL Bank 's annual profit. 
Competition between the major Australian banks for institutional business is high, with a consequent impact on the pricing of facilities provided. This is particularly true for lending facilities where margins had been significantly reduced by two major developments: 
Globalisation of financial institutions had an enormous impact on margins in the first decade of the 21st century. However the events of 2007 and the subsequent uncertainties in international banking and capital markets have widened the margins in the banks favour, making it more expensive for corporate borrowers to raise finance. While this may seem advantageous to the banks the widening of margins can be seen to reflect the greater risks and uncertainties that have prevailed since 2007. 
Development of alternatives to traditional lending through the maturing of financial markets - this is particularly true for Corporate banking where corporate bond and debt issues have provided a major alternative source of funds for institutional borrowers over the past decade. However, the lingering impacts and flow through of Global Financial Crisis of 2007 have altered competitive conditions, making it more difficult for corporate borrowers to access these markets and swinging the competitive advantage back to the banks. 
Given these circumstances MSL Bank is keen to expand its presence in the institutional banking sector of the financial system, and has been actively seeking new corporate clients. It has recently received a number of submissions from major companies looking to alter their financing arrangements (These are detailed in the Section below). 
While it seeks to win new business MSL Bank executive have determined that its traditional conservative approach to accepting risk will not be compromised. Accordingly, any facility approved outside MSL Bank lending policy must contain a clear rationale for acceptance of the business including all aspects outlined in Section C. Approval for such facilities can only be given by the MSL Bank Credit Committee, comprising the Chairman of Directors and 3 other non-executive board members. 
Section B: Project Brief 
Corporate Lending Teams at MSL Bank has been given responsibility for reviewing and assessing the new lending applications recently received. The companies from whom the submissions have been received are briefly introduced below. Your recommendations in the written lending submission will go to the Directors Credit Committee for approval or rejection. MSL Bank uses a standard format for the lending submissions (see below). Your team has been asked to provide the lending submission for one of the companies listed at the end of this document. 
Background details What is the name of the borrower? 
What is their address? 
Who are the major shareholders/unit holders/beneficiaries? 
Overview of the borrower What are the current borrowings (if an existing borrower)? 
What is the history of this borrower? 
If the borrower is not an individual, then who are the individuals behind the borrower? What does the borrower do to generate income? 
What are some of the key characteristics of the business (number of employees, products, location, number of competitors, management, marketing and so on)? 
How has the business changed over time? 
Industry analysis A commentary on the industry, ending with a statement about the key success (strength) factors and key sensitivities (risks) of this industry. 
The nature and extent of competitiveness in the industry. 
In this section you can also provide commentary on the state of the economy (domestic and international) and how it will affect the borrowing company, identifying the risks that these conditions present. 
A discussion of ways of mitigating the identified risks should be provided. 
Financial analysis Analysis of the historical financial (statements of financial position, statement of financial performance and cash flow statement). This analysis should always focus on the ultimate identification of risks (rather than on detailed quoting of numbers). 
Comments on the statement of financial position and statement of financial performance should be made under the broad headings of 'short-term liquidity', 'longer-term solvency' and 'business performance'. 
A cash flow statement, if not provided by the customer, may be generated by the lender and discussed here. 
Security Identification of the key credit issues that come out of the existing security structure. 
Details should be given as to the different items of security and the lending margin that is available overall on this security. 
A concluding comment should be made about the strength of the second way out (security). 
Recommendation A clearly justified recommendation, including a list of relevant covenants and the strength of both the first and second ways out for the proposed borrowings should be clearly noted as either a strength or weakness. A discussion of the proposed facility structure and proposed pricing is also warranted. 

Section C: Prospective Clients - Submissions received for Analysis 

Crown Resorts Limited (www.crownresorts.com.au) 

Lending request: AUD 15 million to construct a six-star luxury hotel resort at Barangaroo South, New South Wales 
Origin Energy Limited (www.originenergy.com.au) 

Lending request: AUD 9 million to develop the Mortlake Power Station in South Western Victoria 

Harvey Norman Holdings Limited (www.harveynormanholdings.com.au) 

Lending request: AUD 8 million to set up a large complex in Devonport ,Tasmania 

Note: You have to select only ONE client for analysis 

Section D: Further Information 
The request for funding is hypothetical, although your lending submission is based on a real company. The predominant source of information for your lending submission will come from the company's website. However, teams are expected to obtain relevant information from other sources when providing an analysis of the operations of the company in question. 
Reference to industry association reports and commentary about industry analysis provided by other reputable sources is an expectation of the Credit Committee of MSL Bank. 
Use the 2013 ANNUAL REPORT for your lending submission. When analysing the historical financials the Credit Committee requires the use of data from the last THREE years. 
Information in excess of the word limit will be gathered, but your team must present a clear, concise and focused analysis of this information. The use of tables, charts and diagrams is an essential component of these submissions. 
You may use any pricing model to determine the interest rate on the proposed funding. Various pricing models will be discussed in class. 
Central to your team's report is risk assessment and ways your team can mitigate these risks. 
You will be required to provide detailed financial analysis, the Credit Committee pays particular attention to the quality of analysis and especially looks for examination of trends and changes that have occurred. 
NO extensions will be granted. 
Harvard Referencing is required.