Students may choose do a retrospective analysis of a default [already happened], see [A] OR a prospective analysis of an impending default [yet to happen], see [B] below.

Do [A] Retrospective Analysis of a Default

While the 2007-2009 financial crisis pushed many corporate borrowers and debt issues over the edge, this was only the most recent iteration of failures caused by both borrower-specific, industry-related and macro-economy related failures. For this assignment, you will identify a particular situation in which there was default on a substantial volume of fixed income securities. Since this is a retrospective analysis of the debt failure — it already happened — there should be plenty of source material — news, reports, financial statements, even bankruptcy filings, etc. — for your paper to provide the following, among other things:

1. Identify the borrower & the debt that fell into default.
2. Discuss the reasons for the default.
   1. Was it because of circumstances unique to the borrower?
   2. Was it Industry practices that placed the whole industry at risk?
   3. Was it general economic factors? (or more likely a combination of all 3).
3. How the default was addressed. Did the borrower go through bankruptcy? Was it liquidated or restructured? What factors drove this outcome?
4. What was the fate of the debtholders? How much were they able to recover and in what form — cash, new debt securities, equity in a restructured firm?

OR do [B] Prospective Analysis of an Impending Default

With the ongoing COVID-19 situation, different countries and economies are impacted differently [compare S Korea, China, Europe, U.S, Latin America]. All economic data and financial market indicators are pointing to a potential financial crisis, or at least sector-specific financial stress, in the future. Since this is a prospective analysis of an impending debt failure — not yet happen, may happen — there should be some source material — news, reports, financial statements, no bankruptcy filings yet — for your paper to provide the following, among other things:

1. Identify the borrower & the debt that might go into default.
2. Discuss the reasons (your analysis) for the impending default.
   1. Was it because of circumstances unique to the borrower?
   2. Was it Industry practices that placed the whole industry at risk?
   3. Was it general economic factors? (or more likely a combination of all 3).
   4. PS: deteriorating financial condition — drop in consumption = drop in revenue, cash flow problems in servicing existing debt, already over-leveraged debt, etc. — are common symptoms of a debt failure. In essence you are playing the role of credit analyst or an equity analyst making a downgrade/sell call to set off an alarm.
3. Unlike the retrospective analysis in [A], for a prospective analysis, there will be no [A3] and [A4] in your paper. However, this might be an attractive assignment for some students:
   1. You are currently a working professional in a particular industry/sector: you are already closely tracking and projecting further deterioration in that area of even a specific company.
   2. So, doing this is a natural extension back to the classroom environment — but, please withhold proprietary, insider information from your workplace.
   3. For anyone looking for their first/new/next job/position, your chosen topic can be part of your interview material. You might as well get some use out of your term paper for a future use.

Deliverables. Papers should be between 11 and 17 pages double spaced:

• Definition of a page: 1-inch margin on all sides, 12-point font size, Times Roman.
• Not counted as pages: cover sheet, abstract, table of content, index, bibliography, diagrams, exhibits, financial statements.
• What is highly valued/graded:
  • It is not about padding your Term Paper — be concise; it is ok to be on the low side of the page count.
  • Scores are not necessarily proportional to page count but based on organization, content quality, and strength of analysis.
  • Papers MUST include a bibliography of sources cited.
  • We want to hear your “voice” — your analysis — the whys, the what you think will happen.
  • Just pasting statements/paragraphs from properly-cited sources is reporting, not analysis.
  • “Crunching” numbers, doing financial ratio analysis, statement analysis, making projections, showing/proving deterioration in financial condition of the subject are always helpful.
  • Having a strong recommendation (subject-dependent) and a conclusion, in your own words, always helps.
• Any direct or indirect quoting or paraphrasing of other material MUST be footnoted. While facts and information will underlie the discussion, the key to this assignment is your analysis and conclusions regarding the topic.
• Papers will be submitted electronically via the Assignments course menu link and are due on the first day of Week 7. Check the Study Guides for deadlines.
• Any further questions, please check in with your facilitator.

The paper is to be prepared using the APA writing style and guideline for references format. This is for references at the end of the paper and the citation of author and dates in the body of the paper. The department uses the APA style as it lends itself well to both reading the paper and understanding references without being cumbersome as some of the other styles are (such as Chicago or MLA). You can down load the student style guide from the American Psychological Association (http://www.apastyle.org/elecref.html) website or you can purchase the APA style guide from the book store.

Papers are to be RESEARCH PAPERS. Remember that work that you use from other authors MUST be referenced and papers MUST include a bibliography. Since it is assumed that you are not an authority on the topic that you are writing on it is expected that this paper is an overview of many different sources of information. These must be contributed to the author using the APA format.