Credit risk is the possibility of financial loss of a creditor (lender, lessor) arising from the failure of a debtor (e.g., borrower, lessee) to meet its financial obligation to pay interest or repay the debt’s principal value when due.  Credit risk requires regulatory capital as mandated by the regulatory bodies and is by far the largest user of risk-based capital on the balance sheet of financial institutions.

Credit risk management (CRM) involves the management of the overall credit risk of a financial institution consistent with its risk appetite, policies and business objectives.  CRM starts with loan underwriting and underwriting starts with credit risk analysis.

Credit analysis is any process used for assessing the credit quality of a borrower or other counterparty and the quality of the collateral to support the borrowing or investment.  It is the analytical study of financial statements and other data, including payment history, reputation reports and credit ratings, typically taken over a period of years, as well as a determination of the value of property serving as collateral.

What happens after credit approval, launch of syndication? What happens during documentation?  The MLA [...] sits across the table from the borrower, negotiating the facility agreement against the [borrower].

Credit assessment of acquisition finance and REF investment facilities is based primarily on the loan to value of the target group and real estate properties, respectively, and the income the assets generate.  Therefore, the special purpose vehicles (SPVs) are set up to ensure that they have no assets, liabilities (financial or otherwise) or operations outside the transaction.  This is done to limit the risk of claims from third parties other than the finance parties to the transaction and to provide its lenders recourse against the obligors to all of the SPV’s assets, the proceeds from the assets and the obligors’ shares.

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