Quiz CCRA-L2: Certified Credit Research Analyst - Level 2
Free Test
Question: / 10
Quiz
Question 1/101/10
Mark Construction Company (MCC) has bagged a contract for construction of a large dam and hydro
power project on river Shivna in Madhya Pradesh (MP). The project is also of relevance from the
irrigation perspective due to its location and as per the agreement MCC will have to undertake
construction of web of canals, approach road to dam, power house and other ancillary units. MCC is
promoted by Mr. Thomas Mark, who is a MP from the ruling party which recently formed
government in MP. Historically, MCC has been engaged into construction of rural roads, small bridges
and railway platforms on contract basis for the Government. MCC will have a separate special
purpose vehicle (SPV) floated for this venture.
The hydro power project comes under the public private partnership scheme of the Government of
MP, where in the private partner builds owns operates and transfers (BOOT) the hydro power plant.
The detailed terms of the hydro power project agreement are as follows:
1. The construction of the dam, canals and hydro power plant shall be undertaken by the contractor.
The
Government of MP will have to acquire land which will submerge on construction of dam and shall
rehabilitate the owners of land.
2. MCC shall have right to operate the hydro power project from date of commencement of
commercial operations (DCCO) for a period of 20 years and shall transfer the project to Government
thereafter. Further,
SPV shall be tax exempt for a period of five years from DCCO i.e. FY17-FY21.
3. The power project is of 600 megawatts (MW) shall comprise 4 units of 150 MW each. The
estimated cost of project is about INR3, 500 Million to be spent over a period of 4 year(s) the project
is estimated to be commercially operational by April 1, 2016 with two units operational on same day
and one unit each will be operational on April 1, 2017 and April 1, 2018.
4. Means of finance:
Means of Finance INR Million
Government Aid (To be classified as Equity) 500Equity 900 Debt 2100
5. Amount if expenditure estimated in various years is as follows:
Debt shall bear a fixed rate of interest of 10% and all interest till DCCO shall be added to the
principal. The expected principal along with capitalized interest is expected to be INR2, 400 Million
(i.e.INR2100 Million debt plus INR300 Million capitalized interest). The repayment of the same shall
be in 12 equated annual installments starting from FY17.
Brief projections for the period of FY17 to FY21 are given below:
Developments as on March 31, 2015
The project manager for the SPV made following comments at a press conferee on March 31, 2015:
As you all are aware, we were running bang on schedule till we last met on December 21, 2014. From
today we are just left with one more year to complete the project in time. However, the flash floods
which struck our dam site on this March 15, 2015 have created havoc in the region. I shall not point
out the loss of lives in the region as you all are well aware of those. Our project has also been badly
hit due to the same and we have been assessing the damage over the last one week. After analyzing
damage, we have made changes in project schedule. Now we will be making only one unit of 150
MW operational on April 1, 2016 and 1 unit each will be added in each of subsequent year(s).
Development as on September 30, 2015
Post the flash floods, lot of environmentalists started raising issues of changes in environment due to
construction of large number of dams. A few Public Interest Litigations (PILs) have been filed in
various courts.
Honorable High Court of MP on September 27, 2015, banned construction of any dams in the region
and banned permissions for new dams till next hearing scheduled on November 30, 2015. MCC in its
press release has indicated that they will apply to the higher court on the matter.
As a credit analyst on March 31, 2012, which of the following sets of risks are you going to put in your
credit appraisal note?
power project on river Shivna in Madhya Pradesh (MP). The project is also of relevance from the
irrigation perspective due to its location and as per the agreement MCC will have to undertake
construction of web of canals, approach road to dam, power house and other ancillary units. MCC is
promoted by Mr. Thomas Mark, who is a MP from the ruling party which recently formed
government in MP. Historically, MCC has been engaged into construction of rural roads, small bridges
and railway platforms on contract basis for the Government. MCC will have a separate special
purpose vehicle (SPV) floated for this venture.
The hydro power project comes under the public private partnership scheme of the Government of
MP, where in the private partner builds owns operates and transfers (BOOT) the hydro power plant.
The detailed terms of the hydro power project agreement are as follows:
1. The construction of the dam, canals and hydro power plant shall be undertaken by the contractor.
The
Government of MP will have to acquire land which will submerge on construction of dam and shall
rehabilitate the owners of land.
2. MCC shall have right to operate the hydro power project from date of commencement of
commercial operations (DCCO) for a period of 20 years and shall transfer the project to Government
thereafter. Further,
SPV shall be tax exempt for a period of five years from DCCO i.e. FY17-FY21.
3. The power project is of 600 megawatts (MW) shall comprise 4 units of 150 MW each. The
estimated cost of project is about INR3, 500 Million to be spent over a period of 4 year(s) the project
is estimated to be commercially operational by April 1, 2016 with two units operational on same day
and one unit each will be operational on April 1, 2017 and April 1, 2018.
4. Means of finance:
Means of Finance INR Million
Government Aid (To be classified as Equity) 500Equity 900 Debt 2100
5. Amount if expenditure estimated in various years is as follows:
Debt shall bear a fixed rate of interest of 10% and all interest till DCCO shall be added to the
principal. The expected principal along with capitalized interest is expected to be INR2, 400 Million
(i.e.INR2100 Million debt plus INR300 Million capitalized interest). The repayment of the same shall
be in 12 equated annual installments starting from FY17.
Brief projections for the period of FY17 to FY21 are given below:
Developments as on March 31, 2015
The project manager for the SPV made following comments at a press conferee on March 31, 2015:
As you all are aware, we were running bang on schedule till we last met on December 21, 2014. From
today we are just left with one more year to complete the project in time. However, the flash floods
which struck our dam site on this March 15, 2015 have created havoc in the region. I shall not point
out the loss of lives in the region as you all are well aware of those. Our project has also been badly
hit due to the same and we have been assessing the damage over the last one week. After analyzing
damage, we have made changes in project schedule. Now we will be making only one unit of 150
MW operational on April 1, 2016 and 1 unit each will be added in each of subsequent year(s).
Development as on September 30, 2015
Post the flash floods, lot of environmentalists started raising issues of changes in environment due to
construction of large number of dams. A few Public Interest Litigations (PILs) have been filed in
various courts.
Honorable High Court of MP on September 27, 2015, banned construction of any dams in the region
and banned permissions for new dams till next hearing scheduled on November 30, 2015. MCC in its
press release has indicated that they will apply to the higher court on the matter.
As a credit analyst on March 31, 2012, which of the following sets of risks are you going to put in your
credit appraisal note?
Select the answer:Select the answer
1 correct answerA.
Off-take risk, Cost and Time over run risk, lack of management experience in such big projects.
B.
Lack of management experience in large projects, Exchange rate risks, Cost and time over run risks.
C.
Cost and Time over run risk, lack of management experience in such big projects.
D.
Obsolete technology risk, political risks and Cost and time over run risks
Quiz
Question 2/102/10
Mark Construction Company (MCC) has bagged a contract for construction of a large dam and hydro
power project on river Shiva in Madhya Pradesh (MP). The project is also of relevance from the
irrigation perspective due to its location and as per the agreement MCC will have to undertake
construction of web of canals, approach road to dam, power house and other ancillary units. MCC is
promoted by Mr. Thomas Mark, who is a MP from the ruling party which recently formed
government in MP. Historically, MCC has been engaged into construction of rural roads, small bridges
and railway platforms on contract basis for the Government. MCC will have a separate special
purpose vehicle (SPV) floated for this venture.
The hydro power project comes under the public private partnership scheme of the Government of
MP, where in the private partner builds owns operates and transfers (BOOT) the hydro power plant.
The detailed terms of the hydro power project agreement are as follows:1. The construction of the
dam, canals and hydro power plant shall be undertaken by the contractor. The
Government of MP will have to acquire land which will submerge on construction of dam and shall
rehabilitate the owners of land.
2. MCC shall have right to operate the hydro power project from date of commencement of
commercial operations (DCCO) for a period of 20 years and shall transfer the project to Government
thereafter. Further,
SPV shall be tax exempt for a period of five years from DCCO i.e. FY17-FY21.
3. The power project is of 600 megawatts (MW) shall comprise 4 units of 150 MW each. The
estimated cost of project is about INR3, 500 Million to be spent over a period of 4 year(s) the project
is estimated to be commercially operational by April 1, 2016 with two units operational om same day
and one unit each will be operational on April 1, 2017 and April 1, 2018.
4. Means of finance:
Means of Finance INR Million
Government Aid (To be classified as Equity) 500Equity 900 Debt 2100
5. Amount if expenditure estimated in various years is as follows:
Debt shall bear a fixed rate of interest of 10% and all interest till DCCO shall be added to the
principal. The expected principal along with capitalized interest is expected to be INR2, 400 Million
(i.e.INR2100 Million debt plus INR300 Million capitalized interest). The repayment of the same shall
be in 12 equated annual installments starting from FY17.
Brief projections for the period of FY17 to FY21 are given below:
Developments as on March 31, 2015
The project manager for the SPV made following comments at a press conferee on March 31, 2015:
As you all are aware, we were running bang on schedule till we last met on December 21, 2014. From
today we are just left with one more year to complete the project in time. However, the flash floods
which struck our dam site on this March 15, 2015 have created havoc in the region. I shall not point
out the loss of lives in the region as you all are well aware of those. Our project has also been badly
hit due to the same and we have been assessing the damage over the last one week. After analyzing
damage, we have made changes in project schedule. Now we will be making only one unit of 150
MW operational on April 1, 2016 and 1 unit each will be added in each of subsequent year(s).
Development as on September 30, 2015
Post the flash floods, lot of environmentalists started raising issues of changes in environment due to
construction of large number of dams. A few Public Interest Litigations (PILs) have been filed in
various courts.
Honorable High Court of MP on September 27, 2015, banned construction of any dams in the region
and banned permissions for new dams till next hearing scheduled on November 30, 2015. MCC in its
press release has indicated that they will apply to the higher court on the matter.
Based on the initial projections, do scenario analysis assuming only 75% capacity is utilized in FY17
and FY18 and thereby revenues will be proportionally reduced.
Compute DSCR under such scenario for FY17 and FY18, assuming other things remain constant?
power project on river Shiva in Madhya Pradesh (MP). The project is also of relevance from the
irrigation perspective due to its location and as per the agreement MCC will have to undertake
construction of web of canals, approach road to dam, power house and other ancillary units. MCC is
promoted by Mr. Thomas Mark, who is a MP from the ruling party which recently formed
government in MP. Historically, MCC has been engaged into construction of rural roads, small bridges
and railway platforms on contract basis for the Government. MCC will have a separate special
purpose vehicle (SPV) floated for this venture.
The hydro power project comes under the public private partnership scheme of the Government of
MP, where in the private partner builds owns operates and transfers (BOOT) the hydro power plant.
The detailed terms of the hydro power project agreement are as follows:1. The construction of the
dam, canals and hydro power plant shall be undertaken by the contractor. The
Government of MP will have to acquire land which will submerge on construction of dam and shall
rehabilitate the owners of land.
2. MCC shall have right to operate the hydro power project from date of commencement of
commercial operations (DCCO) for a period of 20 years and shall transfer the project to Government
thereafter. Further,
SPV shall be tax exempt for a period of five years from DCCO i.e. FY17-FY21.
3. The power project is of 600 megawatts (MW) shall comprise 4 units of 150 MW each. The
estimated cost of project is about INR3, 500 Million to be spent over a period of 4 year(s) the project
is estimated to be commercially operational by April 1, 2016 with two units operational om same day
and one unit each will be operational on April 1, 2017 and April 1, 2018.
4. Means of finance:
Means of Finance INR Million
Government Aid (To be classified as Equity) 500Equity 900 Debt 2100
5. Amount if expenditure estimated in various years is as follows:
Debt shall bear a fixed rate of interest of 10% and all interest till DCCO shall be added to the
principal. The expected principal along with capitalized interest is expected to be INR2, 400 Million
(i.e.INR2100 Million debt plus INR300 Million capitalized interest). The repayment of the same shall
be in 12 equated annual installments starting from FY17.
Brief projections for the period of FY17 to FY21 are given below:
Developments as on March 31, 2015
The project manager for the SPV made following comments at a press conferee on March 31, 2015:
As you all are aware, we were running bang on schedule till we last met on December 21, 2014. From
today we are just left with one more year to complete the project in time. However, the flash floods
which struck our dam site on this March 15, 2015 have created havoc in the region. I shall not point
out the loss of lives in the region as you all are well aware of those. Our project has also been badly
hit due to the same and we have been assessing the damage over the last one week. After analyzing
damage, we have made changes in project schedule. Now we will be making only one unit of 150
MW operational on April 1, 2016 and 1 unit each will be added in each of subsequent year(s).
Development as on September 30, 2015
Post the flash floods, lot of environmentalists started raising issues of changes in environment due to
construction of large number of dams. A few Public Interest Litigations (PILs) have been filed in
various courts.
Honorable High Court of MP on September 27, 2015, banned construction of any dams in the region
and banned permissions for new dams till next hearing scheduled on November 30, 2015. MCC in its
press release has indicated that they will apply to the higher court on the matter.
Based on the initial projections, do scenario analysis assuming only 75% capacity is utilized in FY17
and FY18 and thereby revenues will be proportionally reduced.
Compute DSCR under such scenario for FY17 and FY18, assuming other things remain constant?
Select the answer:Select the answer
1 correct answerA.
FY17: 0.85; FY18: 1.26
B.
FY17: 0.74; FY18: 1.09
C.
FY17:1.35; FY18: 2.09
D.
FY17:0.98; FY18: 1.46
Quiz
Question 3/103/10
Mark Construction Company (MCC) has bagged a contract for construction of a large dam and hydro
power project on river Shivna in Madhya Pradesh (MP). The project is also of relevance from the
irrigation perspective due to its location and as per the agreement MCC will have to undertake
construction of web of canals, approach road to dam, power house and other ancillary units. MCC is
promoted by Mr. Thomas Mark, who is a MP from the ruling party which recently formed
government in MP. Historically, MCC has been engaged into construction of rural roads, small bridges
and railway platforms on contract basis for the Government. MCC will have a separate special
purpose vehicle (SPV) floated for this venture.
The hydro power project comes under the public private partnership scheme of the Government of
MP, where in the private partner builds owns operates and transfers (BOOT) the hydro power plant.
The detailed terms of the hydro power project agreement are as follows:
1. The construction of the dam, canals and hydro power plant shall be undertaken by the contractor.
The
Government of MP will have to acquire land which will submerge on construction of dam and shall
rehabilitate the owners of land.
2. MCC shall have right to operate the hydro power project from date of commencement of
commercial operations (DCCO) for a period of 20 years and shall transfer the project to Government
thereafter. Further,
SPV shall be tax exempt for a period of five years from DCCO i.e. FY17-FY21.
3. The power project is of 600 megawatts (MW) shall comprise 4 units of 150 MW each. The
estimated cost of project is about INR3, 500 Million to be spent over a period of 4 year(s) the project
is estimated to be commercially operational by April 1, 2016 with two units operational om same day
and one unit each will be operational on April 1, 2017 and April 1, 2018.
4. Means of finance:
Means of Finance INR Million
Government Aid (To be classified as Equity) 500Equity 900 Debt 2100
5. Amount if expenditure estimated in various years is as follows:
Debt shall bear a fixed rate of interest of 10% and all interest till DCCO shall be added to the
principal. The expected principal along with capitalized interest is expected to be INR2, 400 Million
(i.e.INR2100 Million debt plus INR300 Million capitalized interest). The repayment of the same shall
be in 12 equated annual installments starting from FY17.
Brief projections for the period of FY17 to FY21 are given below:
Developments as on March 31, 2015
The project manager for the SPV made following comments at a press conferee on March 31, 2015:
As you all are aware, we were running bang on schedule till we last met on December 21, 2014. From
today we are just left with one more year to complete the project in time. However, the flash floods
which struck our dam site on this March 15, 2015 have created havoc in the region. I shall not point
out the loss of lives in the region as you all are well aware of those. Our project has also been badly
hit due to the same and we have been assessing the damage over the last one week. After analyzing
damage, we have made changes in project schedule. Now we will be making only one unit of 150
MW operational on April 1, 2016 and 1 unit each will be added in each of subsequent year(s).
Development as on September 30, 2015
Post the flash floods, lot of environmentalists started raising issues of changes in environment due to
construction of large number of dams. A few Public Interest Litigations (PILs) have been filed in
various courts.
Honorable High Court of MP on September 27, 2015, banned construction of any dams in the region
and banned permissions for new dams till next hearing scheduled on November 30, 2015. MCC in its
press release has indicated that they will apply to the higher court on the matter.
After the developments of March 31, 2015, assuming revenues are directly linked to the power
production and the EBITDA margins remain intact for the year, as were projected, compute the
revised interest coverage ratio dfor FY17 and FY18?
power project on river Shivna in Madhya Pradesh (MP). The project is also of relevance from the
irrigation perspective due to its location and as per the agreement MCC will have to undertake
construction of web of canals, approach road to dam, power house and other ancillary units. MCC is
promoted by Mr. Thomas Mark, who is a MP from the ruling party which recently formed
government in MP. Historically, MCC has been engaged into construction of rural roads, small bridges
and railway platforms on contract basis for the Government. MCC will have a separate special
purpose vehicle (SPV) floated for this venture.
The hydro power project comes under the public private partnership scheme of the Government of
MP, where in the private partner builds owns operates and transfers (BOOT) the hydro power plant.
The detailed terms of the hydro power project agreement are as follows:
1. The construction of the dam, canals and hydro power plant shall be undertaken by the contractor.
The
Government of MP will have to acquire land which will submerge on construction of dam and shall
rehabilitate the owners of land.
2. MCC shall have right to operate the hydro power project from date of commencement of
commercial operations (DCCO) for a period of 20 years and shall transfer the project to Government
thereafter. Further,
SPV shall be tax exempt for a period of five years from DCCO i.e. FY17-FY21.
3. The power project is of 600 megawatts (MW) shall comprise 4 units of 150 MW each. The
estimated cost of project is about INR3, 500 Million to be spent over a period of 4 year(s) the project
is estimated to be commercially operational by April 1, 2016 with two units operational om same day
and one unit each will be operational on April 1, 2017 and April 1, 2018.
4. Means of finance:
Means of Finance INR Million
Government Aid (To be classified as Equity) 500Equity 900 Debt 2100
5. Amount if expenditure estimated in various years is as follows:
Debt shall bear a fixed rate of interest of 10% and all interest till DCCO shall be added to the
principal. The expected principal along with capitalized interest is expected to be INR2, 400 Million
(i.e.INR2100 Million debt plus INR300 Million capitalized interest). The repayment of the same shall
be in 12 equated annual installments starting from FY17.
Brief projections for the period of FY17 to FY21 are given below:
Developments as on March 31, 2015
The project manager for the SPV made following comments at a press conferee on March 31, 2015:
As you all are aware, we were running bang on schedule till we last met on December 21, 2014. From
today we are just left with one more year to complete the project in time. However, the flash floods
which struck our dam site on this March 15, 2015 have created havoc in the region. I shall not point
out the loss of lives in the region as you all are well aware of those. Our project has also been badly
hit due to the same and we have been assessing the damage over the last one week. After analyzing
damage, we have made changes in project schedule. Now we will be making only one unit of 150
MW operational on April 1, 2016 and 1 unit each will be added in each of subsequent year(s).
Development as on September 30, 2015
Post the flash floods, lot of environmentalists started raising issues of changes in environment due to
construction of large number of dams. A few Public Interest Litigations (PILs) have been filed in
various courts.
Honorable High Court of MP on September 27, 2015, banned construction of any dams in the region
and banned permissions for new dams till next hearing scheduled on November 30, 2015. MCC in its
press release has indicated that they will apply to the higher court on the matter.
After the developments of March 31, 2015, assuming revenues are directly linked to the power
production and the EBITDA margins remain intact for the year, as were projected, compute the
revised interest coverage ratio dfor FY17 and FY18?
Select the answer:Select the answer
1 correct answerA.
FY17: 0.90; FY18: 1.85
B.
FY17: 1.85; FY18: 2.93
C.
FY17: 0.49; FY18: 0.97
D.
FY17: 1.80; FY18: 2.78
Quiz
Question 4/104/10
Mark Construction Company (MCC) has bagged a contract for construction of a large dam and hydro
power project on river Shivna in Madhya Pradesh (MP). The project is also of relevance from the
irrigation perspective due to its location and as per the agreement MCC will have to undertake
construction of web of canals, approach road to dam, power house and other ancillary units. MCC is
promoted by Mr. Thomas Mark, who is a MP from the ruling party which recently formed
government in MP. Historically, MCC has been engaged into construction of rural roads, small bridges
and railway platforms on contract basis for the Government. MCC will have a separate special
purpose vehicle (SPV) floated for this venture.
The hydro power project comes under the public private partnership scheme of the Government of
MP, where in the private partner builds owns operates and transfers (BOOT) the hydro power plant.
The detailed terms of the hydro power project agreement are as follows:
1. The construction of the dam, canals and hydro power plant shall be undertaken by the contractor.
The
Government of MP will have to acquire land which will submerge on construction of dam and shall
rehabilitate the owners of land.
2. MCC shall have right to operate the hydro power project from date of commencement of
commercial operations (DCCO) for a period of 20 years and shall transfer the project to Government
thereafter. Further,
SPV shall be tax exempt for a period of five years from DCCO i.e. FY17-FY21.
3. The power project is of 600 megawatts (MW) shall comprise 4 units of 150 MW each. The
estimated cost of project is about INR3, 500 Million to be spent over a period of 4 year(s) the project
is estimated to be commercially operational by April 1, 2016 with two units operational om same day
and one unit each will be operational on April 1, 2017 and April 1, 2018.
4. Means of finance:
Means of Finance INR Million
Government Aid (To be classified as Equity) 500Equity 900 Debt 2100
5. Amount if expenditure estimated in various years is as follows:
Debt shall bear a fixed rate of interest of 10% and all interest till DCCO shall be added to the
principal. The expected principal along with capitalized interest is expected to be INR2, 400 Million
(i.e.INR2100 Million debtplus INR300 Million capitalized interest). The repayment of the same shall
be in 12 equated annual installments starting from FY17.
Brief projections for the period of FY17 to FY21 are given below:
Developments as on March 31, 2015
The project manager for the SPV made following comments at a press conferee on March 31, 2015:
As you all are aware, we were running bang on schedule till we last met on December 21, 2014. From
today we are just left with one more year to complete the project in time. However, the flash floods
which struck our dam site on this March 15, 2015 have created havoc in the region. I shall not point
out the loss of lives in the region as you all are well aware of those. Our project has also been badly
hit due to the same and we have been assessing the damage over the last one week. After analyzing
damage, we have made changes in project schedule. Now we will be making only one unit of 150
MW operational on April 1, 2016 and 1 unit each will be added in each of subsequent year(s).
Development as on September 30, 2015
Post the flash floods, lot of environmentalists started raising issues of changes in environment due to
construction of large number of dams. A few Public Interest Litigations (PILs) have been filed in
various courts.
Honorable High Court of MP on September 27, 2015, banned construction of any dams in the region
and banned permissions for new dams till next hearing scheduled on November 30, 2015. MCC in its
press release has indicated that they will apply to the higher court on the matter.
As a credit rating analyst on September 30, 2015, on receipt of the high court order, what rating
action you will take:
power project on river Shivna in Madhya Pradesh (MP). The project is also of relevance from the
irrigation perspective due to its location and as per the agreement MCC will have to undertake
construction of web of canals, approach road to dam, power house and other ancillary units. MCC is
promoted by Mr. Thomas Mark, who is a MP from the ruling party which recently formed
government in MP. Historically, MCC has been engaged into construction of rural roads, small bridges
and railway platforms on contract basis for the Government. MCC will have a separate special
purpose vehicle (SPV) floated for this venture.
The hydro power project comes under the public private partnership scheme of the Government of
MP, where in the private partner builds owns operates and transfers (BOOT) the hydro power plant.
The detailed terms of the hydro power project agreement are as follows:
1. The construction of the dam, canals and hydro power plant shall be undertaken by the contractor.
The
Government of MP will have to acquire land which will submerge on construction of dam and shall
rehabilitate the owners of land.
2. MCC shall have right to operate the hydro power project from date of commencement of
commercial operations (DCCO) for a period of 20 years and shall transfer the project to Government
thereafter. Further,
SPV shall be tax exempt for a period of five years from DCCO i.e. FY17-FY21.
3. The power project is of 600 megawatts (MW) shall comprise 4 units of 150 MW each. The
estimated cost of project is about INR3, 500 Million to be spent over a period of 4 year(s) the project
is estimated to be commercially operational by April 1, 2016 with two units operational om same day
and one unit each will be operational on April 1, 2017 and April 1, 2018.
4. Means of finance:
Means of Finance INR Million
Government Aid (To be classified as Equity) 500Equity 900 Debt 2100
5. Amount if expenditure estimated in various years is as follows:
Debt shall bear a fixed rate of interest of 10% and all interest till DCCO shall be added to the
principal. The expected principal along with capitalized interest is expected to be INR2, 400 Million
(i.e.INR2100 Million debtplus INR300 Million capitalized interest). The repayment of the same shall
be in 12 equated annual installments starting from FY17.
Brief projections for the period of FY17 to FY21 are given below:
Developments as on March 31, 2015
The project manager for the SPV made following comments at a press conferee on March 31, 2015:
As you all are aware, we were running bang on schedule till we last met on December 21, 2014. From
today we are just left with one more year to complete the project in time. However, the flash floods
which struck our dam site on this March 15, 2015 have created havoc in the region. I shall not point
out the loss of lives in the region as you all are well aware of those. Our project has also been badly
hit due to the same and we have been assessing the damage over the last one week. After analyzing
damage, we have made changes in project schedule. Now we will be making only one unit of 150
MW operational on April 1, 2016 and 1 unit each will be added in each of subsequent year(s).
Development as on September 30, 2015
Post the flash floods, lot of environmentalists started raising issues of changes in environment due to
construction of large number of dams. A few Public Interest Litigations (PILs) have been filed in
various courts.
Honorable High Court of MP on September 27, 2015, banned construction of any dams in the region
and banned permissions for new dams till next hearing scheduled on November 30, 2015. MCC in its
press release has indicated that they will apply to the higher court on the matter.
As a credit rating analyst on September 30, 2015, on receipt of the high court order, what rating
action you will take:
Select the answer:Select the answer
1 correct answerA.
Put ratings on rating watch.
B.
Change rating outlook for long term to negative.
C.
No action, wait for order if higher courts or hearing on November 30, 2015.
D.
Immediately downgrade ratings of SPV.
Quiz
Question 5/105/10
Mark Construction Company (MCC) has bagged a contract for construction of a large dam and hydro
power project on river Shivna in Madhya Pradesh (MP). The project is also of relevance from the
irrigation perspective due to its location and as per the agreement MCC will have to undertake
construction of web of canals, approach road to dam, power house and other ancillary units. MCC is
promoted by Mr. Thomas Mark, who is a MP from the ruling party which recently formed
government in MP. Historically, MCC has been engaged into construction of rural roads, small bridges
and railway platforms on contract basis for the Government. MCC will have a separate special
purpose vehicle (SPV) floated for this venture. The hydro power project comes under the public
private partnership scheme of the Government of MP, where in the private partner builds owns
operates and transfers (BOOT) the hydro power plant. The detailed terms of the hydro power project
agreement are as follows:
1. The construction of the dam, canals and hydro power plant shall be undertaken by the contractor.
The
Government of MP will have to acquire land which will submerge on construction of dam and shall
rehabilitate the owners of land.
2. MCC shall have right to operate the hydro power project from date of commencement of
commercial operations (DCCO) for a period of 20 years and shall transfer the project to Government
thereafter. Further,
SPV shall be tax exempt for a period of five years from DCCO i.e. FY17-FY21.
3. The power project is of 600 megawatts (MW) shall comprise 4 units of 150 MW each. The
estimated cost of project is about INR3, 500 Million to be spent over a period of 4 year(s) the project
is estimated to be commercially operational by April 1, 2016 with two units operational om same day
and one unit each will be operational on April 1, 2017 and April 1, 2018.
4. Means of finance:
Means of Finance INR Million
Government Aid (To be classified as Equity) 500Equity 900 Debt 2100
5. Amount if expenditure estimated in various years is as follows:
Debt shall bear a fixed rate of interest of 10% and all interest till DCCO shall be added to the
principal. The expected principal along with capitalized interest is expected to be INR2, 400 Million
(i.e.INR2100 Million debt plus INR300 Million capitalized interest). The repayment of the same shall
be in 12 equated annual installments starting from FY17.
Brief projections for the period of FY17 to FY21 are given below:
Developments as on March 31, 2015
The project manager for the SPV made following comments at a press conferee on March 31, 2015:
As you all are aware, we were running bang on schedule till we last met on December 21, 2014. From
today we are just left with one more year to complete the project in time. However, the flash floods
which struck our dam site on this March 15, 2015 have created havoc in the region. I shall not point
out the loss of lives in the region as you all are well aware of those. Our project has also been badly
hit due to the same and we havebeen assessing the damage over the last one week. After analyzing
damage, we have made changes in project schedule. Now we will be making only one unit of 150
MW operational on April 1, 2016 and 1 unit each will be added in each of subsequent year(s).
Development as on September 30, 2015
Post the flash floods, lot of environmentalists started raising issues of changes in environment due to
construction of large number of dams. A few Public Interest Litigations (PILs) have been filed in
various courts.
Honorable High Court of MP on September 27, 2015, banned construction of any dams in the region
and banned permissions for new dams till next hearing scheduled on November 30, 2015. MCC in its
press release has indicated that they will apply to the higher court on the matter.
On receiving the credit proposal, the banker informed the company that in FY17 the DSCR is below
unity, which is not acceptable to bank. Which of the following is correct?
power project on river Shivna in Madhya Pradesh (MP). The project is also of relevance from the
irrigation perspective due to its location and as per the agreement MCC will have to undertake
construction of web of canals, approach road to dam, power house and other ancillary units. MCC is
promoted by Mr. Thomas Mark, who is a MP from the ruling party which recently formed
government in MP. Historically, MCC has been engaged into construction of rural roads, small bridges
and railway platforms on contract basis for the Government. MCC will have a separate special
purpose vehicle (SPV) floated for this venture. The hydro power project comes under the public
private partnership scheme of the Government of MP, where in the private partner builds owns
operates and transfers (BOOT) the hydro power plant. The detailed terms of the hydro power project
agreement are as follows:
1. The construction of the dam, canals and hydro power plant shall be undertaken by the contractor.
The
Government of MP will have to acquire land which will submerge on construction of dam and shall
rehabilitate the owners of land.
2. MCC shall have right to operate the hydro power project from date of commencement of
commercial operations (DCCO) for a period of 20 years and shall transfer the project to Government
thereafter. Further,
SPV shall be tax exempt for a period of five years from DCCO i.e. FY17-FY21.
3. The power project is of 600 megawatts (MW) shall comprise 4 units of 150 MW each. The
estimated cost of project is about INR3, 500 Million to be spent over a period of 4 year(s) the project
is estimated to be commercially operational by April 1, 2016 with two units operational om same day
and one unit each will be operational on April 1, 2017 and April 1, 2018.
4. Means of finance:
Means of Finance INR Million
Government Aid (To be classified as Equity) 500Equity 900 Debt 2100
5. Amount if expenditure estimated in various years is as follows:
Debt shall bear a fixed rate of interest of 10% and all interest till DCCO shall be added to the
principal. The expected principal along with capitalized interest is expected to be INR2, 400 Million
(i.e.INR2100 Million debt plus INR300 Million capitalized interest). The repayment of the same shall
be in 12 equated annual installments starting from FY17.
Brief projections for the period of FY17 to FY21 are given below:
Developments as on March 31, 2015
The project manager for the SPV made following comments at a press conferee on March 31, 2015:
As you all are aware, we were running bang on schedule till we last met on December 21, 2014. From
today we are just left with one more year to complete the project in time. However, the flash floods
which struck our dam site on this March 15, 2015 have created havoc in the region. I shall not point
out the loss of lives in the region as you all are well aware of those. Our project has also been badly
hit due to the same and we havebeen assessing the damage over the last one week. After analyzing
damage, we have made changes in project schedule. Now we will be making only one unit of 150
MW operational on April 1, 2016 and 1 unit each will be added in each of subsequent year(s).
Development as on September 30, 2015
Post the flash floods, lot of environmentalists started raising issues of changes in environment due to
construction of large number of dams. A few Public Interest Litigations (PILs) have been filed in
various courts.
Honorable High Court of MP on September 27, 2015, banned construction of any dams in the region
and banned permissions for new dams till next hearing scheduled on November 30, 2015. MCC in its
press release has indicated that they will apply to the higher court on the matter.
On receiving the credit proposal, the banker informed the company that in FY17 the DSCR is below
unity, which is not acceptable to bank. Which of the following is correct?
Select the answer:Select the answer
1 correct answerA.
Had the cash accruals be more by INR50 Million, DSCR would have been unity. SPV can provide an implicit credit enhancement for the same from MCC.
B.
Had the cash accruals be more by INR8 Million, DSCR would have been unity. SPV can provide an implicit credit enhancement for the same from MCC.
C.
Had the cash accruals be more by INR8 Million, DSCR would have been unity, SPV can provide an explicit credit enhancement for the same from MCC.
D.
Had the cash accruals be more by INR12 Million, DSCR would have been unity. SPV can provide an explicit credit enhancement for the same from MCC.
Quiz
Question 6/106/10
Scott is a credit analyst with one of the credit rating agencies in Indi
a. He was looking in Oil and Gas Industry companies and has presented brief financials for following
4 entities:
Which of the four entities has best interest coverage ratios?
a. He was looking in Oil and Gas Industry companies and has presented brief financials for following
4 entities:
Which of the four entities has best interest coverage ratios?
Select the answer:Select the answer
1 correct answerA.
C Ltd
B.
D Ltd
C.
A Ltd
D.
B Ltd
Quiz
Question 7/107/10
Scott is a credit analyst with one of the credit rating agencies in Indi
a. He was looking in Oil and Gas Industry companies and has presented brief financials for following
4 entities:
Two credit analysts are discussing the DM-approach to credit risk modeling. They make the following
statements:
Analyst A: A portfolio’s standard deviation of credit losses can be determined by considering the
standard deviation of credit losses of individual exposures in the portfolio and summing them all up.
Analyst B: I do not fully agree with that. Apart from individual standard deviations, one also needs to
consider the correlation of the exposure with the rest of the portfolio so as to account for
diversification effects. Higher correlations among credit exposures will lead to higher standard
deviation of the overall portfolio.
a. He was looking in Oil and Gas Industry companies and has presented brief financials for following
4 entities:
Two credit analysts are discussing the DM-approach to credit risk modeling. They make the following
statements:
Analyst A: A portfolio’s standard deviation of credit losses can be determined by considering the
standard deviation of credit losses of individual exposures in the portfolio and summing them all up.
Analyst B: I do not fully agree with that. Apart from individual standard deviations, one also needs to
consider the correlation of the exposure with the rest of the portfolio so as to account for
diversification effects. Higher correlations among credit exposures will lead to higher standard
deviation of the overall portfolio.
Select the answer:Select the answer
1 correct answerA.
Only Analyst A is correct
B.
Both are correct
C.
Only Analyst B is correct
D.
Both are incorrect
Quiz
Question 8/108/10
Scott is a credit analyst with one of the credit rating agencies in Indi
a. He was looking in Oil and Gas Industry companies and has presented brief financials for following
4 entities:
Giving equal weightage to all three ratios, determine which of the above entities should be rated
highest on a relative scale.
a. He was looking in Oil and Gas Industry companies and has presented brief financials for following
4 entities:
Giving equal weightage to all three ratios, determine which of the above entities should be rated
highest on a relative scale.
Select the answer:Select the answer
1 correct answerA.
C Ltd
B.
A Ltd
C.
D Ltd
D.
B Ltd
Quiz
Question 9/109/10
Scott is a credit analyst with one of the credit rating agencies in Indi
a. He was looking in Oil and Gas Industry companies and has presented brief financials for following
4 entities:
From the data given below, calculate the standard deviation of the credit portfolio assuming that
facility’s exposure is known with certainty, customer defaults and LGDs are independent of one
another and LGDs are independent across borrower(s).
Credit Facility A – Loss Equivalent Exposure of $60m, expected Default frequency of 1.5%, loss given
default
of 30%, Std Deviation of LGD – 5% and Correlation to portfolio – 0.10
Credit Facility B – Loss Equivalent Exposure of $25m, expected Default frequency of 2%, loss given
default of 12%, Std Deviation of LGD – 12% and Correlation to portfolio – 0.45
Credit Facility C – Loss Equivalent Exposure of $15m, expected Default frequency of 5%, loss given
default of 85%, Std Deviation of LGD – 18% and Correlation to portfolio – 0.22
a. He was looking in Oil and Gas Industry companies and has presented brief financials for following
4 entities:
From the data given below, calculate the standard deviation of the credit portfolio assuming that
facility’s exposure is known with certainty, customer defaults and LGDs are independent of one
another and LGDs are independent across borrower(s).
Credit Facility A – Loss Equivalent Exposure of $60m, expected Default frequency of 1.5%, loss given
default
of 30%, Std Deviation of LGD – 5% and Correlation to portfolio – 0.10
Credit Facility B – Loss Equivalent Exposure of $25m, expected Default frequency of 2%, loss given
default of 12%, Std Deviation of LGD – 12% and Correlation to portfolio – 0.45
Credit Facility C – Loss Equivalent Exposure of $15m, expected Default frequency of 5%, loss given
default of 85%, Std Deviation of LGD – 18% and Correlation to portfolio – 0.22
Select the answer:Select the answer
1 correct answerA.
US$6.88 million
B.
US$ 1.16 million
C.
US$ 1.66 million
D.
US$ 0.10 million
Quiz
Question 10/1010/10
Scott is a credit analyst with one of the credit rating agencies in Indi
a. He was looking in Oil and Gas Industry companies and has presented brief financials for following
4 entities:
Which of the following statements is incorrect?
a. He was looking in Oil and Gas Industry companies and has presented brief financials for following
4 entities:
Which of the following statements is incorrect?
Select the answer:Select the answer
1 correct answerA.
B Ltd has higher EBITDA margins as compared to C Ltd.
B.
D Ltd has higher EBITDA margins as competed to B Ltd.
C.
C Ltd has worst total debt to EBITDA ratio.
D.
B Ltd has worst interest coverage ratio.
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