PURPOSE OF TOOL
 
User-friendly Excel tool for determining the fair value of a debt facility or loan and other key metrics.
 
 
METHODOLOGY
 
The template calculates the fair value of a debt facility / loan by extracting the remaining cash flows to maturity of the loan and discounting these cash flows at the market interest rates at the valuation date. The market rates are derived by adding the option adjusted spread (reflective of the credit risk of the loan) and any illiquidity premium to the Government bond yield curve, which is assumed to be the risk-free rate. The resulting sum of discounted cash flows is the implied fair value for the loan.
 
 
KEY OUTPUTS
 
The tool computes a number of key loan / debt metrics including:
Debt facility / loan fair value;
Debt facility / loan fair value as a percentage of book value;
Debt facility / loan duration;
Debt facility / loan yield to maturity;
A chart plotting the cumulative debt facility / loan cash flows, yield curve and discounting rates.
 
 
KEY INPUTS
 
The key user-defined inputs of the tool include:
Loan reference name
Currency
Valuation date
Loan balance at valuation date
Loan type (amortising or bullet)
Maturity date
Payment frequency (Monthly, Quarterly, Semiannually, Yearly)
Interest rate
Government Bond Yield curve
Option adjusted spread
Illiquidity premium (if required)
Prepayment rate (if required)
 
 
STRUCTURE
 
The template contains, 6 tabs split into input ('i_'), calculation ('c_'), output ('o_’) and system tabs. The only tab to be populated by the user is the input tab ('i_Assumptions'). The calculation tab uses the user-defined inputs to calculate and produce the template outputs presented in 'o_Results'.
 
System tabs include the following:
'Front Sheet' containing a disclaimer, instructions and contents;
Checks dashboard containing a summary of checks by tab.
 
 
OTHER KEY FEATURES
 
Other key features of this tool include the following:
The tool follows best practice financial modelling guidelines and includes instructions, line item explanations, checks and input validations;
The tool can calculate fair values for debt facility / loans with a maximum maturity of 20 years from valuation date;
The template can calculate fair value for a Bullettype debt / loan (all principal is paid on maturity date) or an amortising debt / loan (principal is paid as part of the periodic instalments across the life of the loan);
The template calculates interest and loan balance on a daily basis for a maximum of 20 years (+7,300 rows);
The daily interest rates are derived from the yield curve points using linear interpolation;
Loan/Debt name, currency, valuation date, etc. are customisable;
The tool includes a checks dashboard which summarises all the checks included in the various tabs making it easier to identify any errors;
The tool includes checks and input validations to help ensure input fields are populated accurately.
 
 
MODIFICATIONS & SUPPORT
 
If you require any be-spoke modifications or support, we are more than happy to assist. Please send us a message below or contact us on hello@useprojectify.com