ADVENT®

UNIVERSITY

Introduction to Bank Debt

for Geneva
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Part number: Geneva_IntrotoBankDebt172

Release number: Geneva Release 17.2

Publication date: February 2018

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 Contents & Exercises

Contents & Exercises

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii
What You’ll Learn in this Workshop . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .iii
About Your Workstation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .iii
Using Geneva Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .iii

1 Setting Up Bank Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

Understanding Bank Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Understanding Credit Facility Tasks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Creating a Portfolio. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Exercise 1: Create a new portfolio. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Defining a Credit Deal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Exercise 2: Define a credit deal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Defining a Credit Facility. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Exercise 3: Define a revolver credit facility.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
About Credit Activity Events and Transaction Descriptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Defining the Global Facility Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Exercise 4: Define the global facility amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Defining Credit Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Exercise 5: Define Credit Contract 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Recording Drawdowns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Exercise 6: Record a drawdown against a contract. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Purchasing Credit Facility Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Exercise 7: Purchase a revolver credit facility. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Exercise 8: Review funded and unfunded portion amounts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Calculating the Cost of Bank Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Exercise 9: Prove out the cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Exercise 10: Run the Credit Facility Contract History report.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Working with Accrual Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Exercise 11: Define an accrual contract. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Exercise 12: Record a drawdown against the contract. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Exercise 13: Run the Credit Facility Contract Detail report.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Exercise 14: Delete your previous transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

i
 Contents & Exercises

2 Understanding Accrued Interest and Delayed Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Understanding Accrued Interest on Bank Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Understanding Interest Accrual for Trades that Settle on Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Exercise 15: Prove out accrued interest for a par/near par bank debt trade. . . . . . . . . . . . . . . . . . . . . . . . . . 25
Exercise 16: Prove out accrued interest for a distressed bank debt trade. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Understanding Interest Accrual for Trades with a Delayed Settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Exercise 17: Define a delayed compensation method. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Exercise 18: Prove out accrued interest and delayed compensation for a par/near par bank debt trade. . 31
Exercise 19: Prove out accrued interest and delayed compensation for a distressed bank debt trade. . . . 37
Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

3 Entering Credit Activity Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

Understanding Credit Facility Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Working with Rollovers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Exercise 20: Define a “placeholder” contract. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Exercise 21: Define Credit Contract 2, and update your Buy transaction.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Exercise 22: Roll over a placeholder contract into a real one. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Exercise 23: Define Credit Contract 3.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Exercise 24: Record a rollover with interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Entering Commitment Increases, Reductions, and Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Exercise 25: Record a commitment increase.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Exercise 26: Enter a prepayment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Closing Credit Facility Positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

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 What You’ll Learn in this Workshop

Introduction

What You’ll Learn in this Workshop

Geneva’s Bank Debt module allows you to purchase and trade bank debt investments and record bank debt activity. If
you sell the debt, Geneva calculates any realized gain/loss and the amount of interest payable or receivable. This
course provides an introduction to bank debt, and shows you how to:
 Set up revolver and term loan credit facility investments.
 Define credit contracts.
 Determine the funded and unfunded portions of bank debt.
 Open a credit facility position.
 Calculate cost for bank debt.
 Enter Credit Activity transactions (drawdown, rollover, commitment increase, prepayment).
 Prove out accrued interest and delayed compensation.
This workshop requires a working knowledge of Geneva’s basic data records (investments, portfolios, transactions,
and prices), and Geneva reporting.

About Your Workstation

You’ll use a workstation to complete hands-on exercises in this book. Note the number on your workstation—you’ll
need it when you complete certain exercises.

Using Geneva Resources

 The Introduction to Bank Debt in Geneva Hands-On Workbook provides overviews of essential Geneva features,
and hands-on exercises that walk you through various tasks.
 Geneva Help provides overview information, along with detailed instructions. Help is always up-to-date with the
current release. Look for cross-references to Help throughout this workbook.
From any Geneva screen, press F1, or click the Help icon.
 Advent Community. Advent’s client-only Web site, Advent Community (community.advent.com) is your resource
for product information, support, downloads, training, and more. You’ll complete an easy registration process on
your first visit to Community.
 Geneva Product Page. On Community, click Products & Solutions → Core Products → Geneva.
 Knowledge Base (KBs). Search the extensive Knowledge Base (KB) for product information, and sign up for the
Advent KB Alerts service. On Community, click Support & Services → Knowledge Base, and then click the
Geneva tab.
 Latest Fixes & Requests. Use Geneva Latest Fixes and Requests to find information about Geneva product
requests (“PRs”) and the issues that Geneva Development is addressing, or planning to address, in given

iii
 Geneva releases. On Community, click Products and Solutions → Core Products → Geneva, and view the Latest
Fixes & Requests section.

iv
LESSON 1

Setting Up Bank Debt

Includes
Understanding Bank Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Understanding Bank Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Creating a Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Defining a Credit Deal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Defining a Credit Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Defining the Global Facility Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Defining Credit Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Recording Drawdowns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Purchasing Credit Facility Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Calculating the Cost of Bank Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Working with Accrual Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

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Lesson 1 Setting Up Bank Debt

Understanding Bank Debt

In Geneva, “bank debt” refers to credit that an agent (a bank or other lending institution) extends to a borrower. The
borrower typically pays an index rate (LIBOR or the Prime Rate), plus a spread, on the money that it borrows. Banks
frequently securitize and sell this debt as a way to reduce their exposure, particularly if the debt is distressed.
Investors typically purchase this debt at a discount, and receive both interest and gain/loss from it. In return, the
investor becomes responsible for funding a portion of the debt.
Each time that the borrower borrows against the debt, a contract (sometimes called a “leg” or “tranche”) is created
between the borrower and the agent, which specifies the terms under which the funds are borrowed. When the
borrower makes an interest payment, retires some of the debt, or conducts some other action related to the debt,
the agent adjusts the terms of the investment accordingly. A portion of the results of these activities then flow
through to the investor, according to the percentage of the debt that the investor owns.

Understanding Revolvers and Term Loans

Geneva refers to the total credit commitment that an agent extends to a borrower as a credit facility, or sometimes a
global facility. In Geneva, you can define two types of credit facilities.

In a... The agent offers a...

Revolver Maximum amount, called the commitment amount, against which the borrower can borrow. The total amount
that the borrower has borrowed at any given time is the revolver’s funded portion; the remainder (the amount
still available to borrow) is its unfunded portion.
Each time the borrower borrows (draws down) additional funds from the agent, the unfunded portion of the
revolver decreases and the funded portion increases. Drawing down can create a new contract for the revolver.
Each contract defines the start date, maturity date, interest rate, payment schedule, accrual calendar, and
currency denomination for that portion of the debt.

Term loan Single amount that the borrower can borrow as a lump sum. This loan, however, can comprise multiple contracts,
each with its own start date and maturity date, interest rate, payment schedule, reset schedule, accrual calendar,
and currency denomination. At no time is any portion of the facility unfunded, however; if a contract matures, it
is replaced by one or more new contracts for the amount of the old contract, or the amount of the loan is
reduced.
NOTE A fully-funded facility with only a single contract is sometimes called a “trade claim.”

2
 Understanding Credit Facility Tasks

Understanding Credit Facility Tasks

In this workshop, we’ll work with the Topflight Airlines credit facility (a fictitious credit facility).

Topflight Airlines Credit Facility

Topflight Airlines needs a $10,000,000 revolving credit line (in U.S. dollars). Uptown Bank decides to provide it, but
to reduce their risk, they securitize it and make it available to investors.
You’ll track this “revolver” credit facility as the Topflight Airlines Credit Facility, with a global facility amount of
$10,000,000.
Your portfolio (which uses U.S. dollars as its book currency) purchases 10% of this revolver. This means that your
portfolio owns 10% of $10,000,000, or $1,000,000.
When Topflight Airlines borrows $1,000,000 against its credit, you’ll track it as a drawdown against Topflight
Airlines Contract 1. Your portfolio then owns 10% of Topflight Airlines Contract 1 (10% × $1,000,000), or $100,000.

Creating a Portfolio
You’ll create a portfolio for yourself so that you can invest in the Topflight Airlines credit facility.

Exercise 1: Create a new portfolio.

Create a portfolio based on the Hunter portfolio.
1 Choose Define → Parties → Portfolio, or click .
2 In the Portfolio field, select the Hunter portfolio.

3 On the General tab, change these values.

Portfolio Enter XXX_BankDebt, replacing XXX with your initials.

Name Working with Bank Debt
4 Click Add , click OK, and then close the record.

Defining a Credit Deal

You can define credit deals that comprise one or more credit facilities. In Geneva, you define a credit deal as an
investment.

Exercise 2: Define a credit deal.

1 Choose Define → Investments → Credit Instruments → Credit Deal.

2 On the General tab, enter these values.

Investment XXX_Topflight_Uptown_Bank
Description Topflight_Uptown_Bank
Exchange OTC

Accept default values in the rest of the fields.

3
Lesson 1 Setting Up Bank Debt

3 On the Pricing tab, enter these values.

Local Basis Currency USD

Press TAB to enter USD in the remaining required currency fields. Accept default values in the rest of the fields.
4 On the Groupings Tab, enter these values.

Asset Type BD
Investment Type AGENCY
Accept default values in the rest of the fields.
5 On the Credit Deal Specific Tab, enter these values.

Credit Agreement Date 07/01/2010

Credit Agreement Close Date 10/21/2041

6 Click the first row of the grid in Credit Deal Commitment Changes, and enter these values.

Deal Commitment Amount 8,000,000

Deal As Of Date 07/01/2010
Deal Commitment Amount 10,000,000
Deal As Of Date 07/01/2011
Hyperlink Text Field www.uptownbank.com

7 Add and close the record.

Defining a Credit Facility

In Geneva, you define a credit facility as an investment. You’ll specify:
 Descriptive information.
 Issue date, dated date, and maturity dates.
You can enter information about the facility’s contracts at the time that you define the Credit Facility investment, or
at any time during the life of the credit facility. In this workshop, we’ll enter contracts later.

Exercise 3: Define a revolver credit facility.

Create a Topflight Airlines credit facility, which is a revolver facility.
1 Choose Define  Investments  Credit Instruments  Credit Facility.

TIP Since we’ll be returning to this screen a lot during this workshop, click Add To Favorites to add it to your
list of Favorite screens on the Start page. (If you already closed the Start page, choose View  Start Page to open
it again.) This gives you a quick way to access this screen again. As you continue working through exercises, you
can add other screens to your Favorites list, including the Credit Contract Definition, Buy, and Select Report screens.
2 On the General tab, enter these values.

Investment XXX_Topflight_Airlines_Credit_Facility
Description Topflight Airlines Credit Facility

4
 About Credit Activity Events and Transaction Descriptions

Distressed Days 20
LMA Days 10
Par/Near Par Days 7
Exchange OTC
Agent Bank Uptown Bank
Credit Deal XXX_Topflight_Uptown_Bank

Accept default values in the rest of the fields.

3 On the Pricing tab, enter these values.

Local Basis Currency USD

Press TAB to enter USD in the remaining required currency fields. Accept default values in the rest of the fields.
4 On the Groupings tab, enter these values.

Asset Type BD
Investment Type BankDebt

5 On the Credit Facility Specific tab, enter these values.

Issue Date 07/01/2011

Dated Date 07/01/2011
Maturity Date 07/01/2041
Coupon Frequency Quarterly
Interest Rate 0.50
Accrual Days/Year 365

Accept default values in the rest of the fields.

TIP If you do not know the issue date and maturity date, you can enter the trade date of the facility’s first opening
transaction as the issue date and dated date, and a date far into the future as the maturity date.
6 Add and close the record.

TIP If many of the credit facilities in your system have matured, you can hide them from your
Investment dropdown lists. On the Misc tab of the Credit Facility Definition screen, select the Hide check
box. You can show these investments again at any time. (Note that you can hide any obsolete
investments, not just credit facilities.)

About Credit Activity Events and Transaction Descriptions

You use Credit Activity transactions to record various events that can occur while a portfolio holds a facility.

5
Lesson 1 Setting Up Bank Debt

Event Purpose of the Credit Activity transaction

Define Global Defines the global facility amount, or total credit commitment.
Amount

Drawdown Borrows against the loan.

 For a term loan, the transaction will borrow the full loan amount.
 For a revolver, the transaction borrows money from the facility’s unfunded portion (thus increasing the
facility’s funded portion).

Prepayment Pays back a portion of a revolver contract’s funded portion before the contract’s maturity date. This event
is sometimes called a “partial repayment,” “early paydown,” or simply “paydown.” For a revolver, this
amount returns to the unfunded portion of the facility.

Commitment Reduces the global facility amount.

Reduction  For a term loan, you must enter this transaction along with another Credit Activity transaction that
matures or prepays/pays down the contract.
 For a revolver, this transaction reduces the unfunded portion of the facility.

Commitment Increases the global facility amount. For a revolver, the transaction increases the unfunded portion of the
Increase facility.

Rollover Rolls a maturing contract into one or more new contracts. The borrower pays the interest (and any fees)
due on the maturing contract.

Since Credit Activity transactions record so many different types of events, you’ll typically use transaction
descriptions to distinguish between them.
Transaction descriptions are user-defined descriptive labels that you can use in various transactions (not just Credit
Activity transactions). Geneva uses transaction descriptions to categorize data on reports, and you can use them to
zero in on different types of transactions in your queries.
As you enter credit activity transactions throughout this workshop, you’ll specify the appropriate transaction
description. Back at your firm, you may need to define transaction descriptions that are not already defined.

Defining the Global Facility Amount

The global facility amount is the total credit commitment that an agent extends to a borrower. Do not confuse the
global facility amount with the amount of a facility that an investor purchases. Typically, investors purchase only a
portion of the total global facility amount.

6
 Defining Credit Contracts

Exercise 4: Define the global facility amount.

The global facility amount for the Topflight Airlines credit facility is $10,000,000.
1 Choose Transactions → Asset Servicing → Credit Activity.

2 Enter these values.

Portfolio GenevaDependentTransactionPool. Entering this value means the transaction will apply to all portfolios
that hold a percentage of the facility.
Credit Facility XXX_Topflight_Airlines_Credit_Facility
Tran Description Define Global Amount
Event Date 07/01/2011
Define Facility Amount Select this check box.
New Facility Amount 10,000,000.00

3 Add and close the record.

Defining Credit Contracts

You can enter information about a credit facility’s contracts at the time that you define the Credit Facility investment,
or at any time during the life of the credit facility. You’ll specify:
 Interest rate information (typically a spread, and variable rate information).
 A time frame during which the interest rate information is valid.
You can update a credit facility when its contracts roll over, or when the borrower draws down more funds from the
facility or reduces its commitment, defining new contracts as necessary.
Because you may not know all of the details about a facility’s opening contracts until actual settlement date, you can
set up a single “placeholder” contract for the facility’s total funded portion. Before the actual settlement date of the
first opening transaction, you must enter another Credit Activity transaction to roll over the placeholder contract into
the actual contracts for the facility that are open on the actual settlement date. (In the U.S., contracts may take
several months to settle.)

IMPORTANT You do not need to set up separate contracts for the funded and unfunded portions of a bank debt
investment.

Exercise 5: Define Credit Contract 1.

This credit contract will specify the interest rate that applies to the money that Topflight borrows between July 28
and September 30.
1 Choose Define → Investments → Credit Instruments → Credit Facility.

2 In the Investment field, select XXX_Topflight_Airlines_Credit_Facility, and then press TAB.

3 Click the Credit Contracts tab.

4 Click Insert Row . This opens the Credit Contract Definition screen.
TIP Notice that the Credit Facility field in this screen is defined automatically as
XXX_Topflight_Airlines_Credit_Facility. When you create a credit contract directly from a credit facility’s Credit
Facility Definition screen, the credit contract you create is linked automatically to that credit facility.

7
Lesson 1 Setting Up Bank Debt

5 Enter these values.

Contract XXX_Topflight_Airlines_Contract1
Description Topflight Airlines Contract 1
Contract Type LIBOR
Issue Date 07/28/2011
Dated Date 07/28/2011
Maturity Date 09/30/2011
Coupon Frequency Quarterly
Local Basis Currency USD

Press TAB to enter USD in the remaining required currency fields.

6 In the Variable Rate Schedule section, in the grid, enter these values.

Commit Type Date Rate/Spread Price Override

insert 07/28/2011 3.0 2.75

NOTE Geneva automatically creates a variable rate schedule for each credit contract, and references variable rate
schedules when calculating accrued interest for reports. The rate/spread and index rate or reference index you
enter on the Credit Contract screen appears in the variable rate schedule. If you want the credit contract’s interest
rate to vary over time, you can enter resets for it in the Variable Rate schedule screen, based either on a reference
index investment, or on specific rates that you enter.
7 Add and close the record.

Recording Drawdowns
When the borrower borrows additional funds from the agent, the event is called a drawdown. For a revolver like the
Topflight Airlines Credit Facility, a drawdown increases the funded portion of the facility and decreases the unfunded
portion.

Exercise 6: Record a drawdown against a contract.

Topflight Airlines borrows $1,000,000 against its credit. Track this event as a drawdown against Topflight Airlines
Contract 1.
1 Choose Transactions → Asset Servicing → Credit Activity.

2 Enter these values.

Portfolio GenevaDependentTransactionPool
Credit Facility XXX_Topflight_Airlines_Credit_Facility
Tran Description Drawdown
Event Date 07/28/2011

8
 Purchasing Credit Facility Investments

3 In the Credit Contract Activity section, click the first row of the grid. Then enter these values.

Contract XXX_Topflight_Airlines_Contract1 automatically appears.

New Amount 1,000,000.00
Activity Drawdown

4 Add and close the record.

Purchasing Credit Facility Investments

You use the Buy and Sell transactions or distributions to purchase and sell credit facility investments. You can also use
the Receive Long transaction to move a credit facility into a portfolio.
NOTE For credit facilities that are entered into a portfolio with a Receive Long transaction, Geneva calculates interest
from either the last interest payment date or the tax lot actual settle date, whichever date is more recent. For
payment-in-kind (PIK) credit contracts, however, Geneva always calculates interest from the last interest payment
date. For details about interest accrual, see Lesson 3, Understanding Accrued Interest and Delayed Compensation.

Exercise 7: Purchase a revolver credit facility.

Purchase a portion of the Topflight Airlines credit facility.
1 Choose Transactions → Buy, or click .
2 Enter these values.

Portfolio XXX_BankDebt
Investment XXX_Topflight_Airlines_Credit_Facility
Trade Date 08/02/2011
Quantity 1,000,000.00. This represents 10% of global facility amount of $10,000,000.
Price 95
Settlement Type Assignment
Trades As Par/Near. Note that the Contractual and Actual field values automatically change from 08/30/2011 to
08/11/2011.
Accept default values in the rest of the fields.
3 Add the record.

4 Right-click the Investment field and choose Zoom. On the Credit Facility Definition screen, click Dependent Events
. Expand the Dependent Events Viewer to see the GDTP dependent events you entered for this investment.
Then close the Dependent Events Viewer.
5 Close the Buy Transaction screen.

TIP You can have transactions associated with Credit Facilities automatically default to a date of 12/31/9999. On the
Preferences tab of your portfolio, select the “Default Actual Settlement Date on Credit Facilities to 12/31/1999” check
box.

9
Lesson 1 Setting Up Bank Debt

Exercise 8: Review funded and unfunded portion amounts.

The Credit Facility Contract Detail report displays details about each open credit contract for each credit facility in the
portfolio.
1 Choose Reports → Select Report, or click .
2 Click in the Find Reports field, and begin entering the report name, Credit Facility Contract Detail. When the report
name appears in the Available Reports pane, click on it to select it.
3 On the Basic tab, enter these values.

Portfolio XXX_BankDebt
Period End 08/15/2011

Accept default values in the rest of the fields.

4 Click Submit Report. Compare your report to the one on the following page, and then complete the information
below

Funded and unfunded portions

1 Global contract amount $

This equals the drawdown amount.

2 Local quantity for the funded portion $

This represents 10% of $ ,
the global contract (drawdown) amount.

3 Total commitment owned by your $

portfolio This represents 10% of $ ,
the global facility amount.

4 Funded portion $
This represents 10% of $ ,
the global contract (drawdown) amount.

5 Unfunded portion $
This equals the total commitment less the funded portion.

10
 Updated Through: 07/26/2017 11:32:56
Working with Bank Debt Reporting Currency: USD

CREDIT FACILITY CONTRACT DETAIL Reporting Date: 08/15/2011

Interest Accrual
Global Funded/Unfunded Pro-Rata % Local Quantity FX Rate Book Quantity Start Date End Date Rate From Date Days Local Accrued Interest Book Accrued Interest
Topflight Airlines Credit Facility (USD) 141.50
Topflight Airlines Credit
10.000000 900,000.00 900,000.00 61.64 61.64
Facility (Unfunded)
9,000,000.00 10.000000 900,000.00 1.000 900,000.00 07/01/2011 07/01/2041 0.5000 08/11/2011 5 61.64 61.64
Contract1_Topflight_Airline
10.000000 100,000.00 100,000.00 79.86 79.86
s (USD)
1,000,000.00 10.000000 100,000.00 1.000 100,000.00 07/28/2011 09/30/2011 5.7500 08/11/2011 5 79.86 79.86
Total Funded 100,000.00
Total UnFunded 900,000.00
Total Commitment 1,000,000.00

11
Purchasing Credit Facility Investments
Lesson 1 Setting Up Bank Debt

Calculating the Cost of Bank Debt

Bank debt is priced like a bond. The buyer purchases a percentage of the global facility amount (called the percentage
owned), and typically purchases the debt at a discount.
Geneva calculates the cost of each type of credit facility differently.

Debt type Cost

Term loan Because there is no unfunded portion in a term loan, the buyer’s cost is:
(Percentage owned × Total facility amount) × Price*
* Multiplied by the credit facility’s trading and pricing factors.

Revolver The buyer pays only for the funded portion of a revolver. In addition, the seller typically compensates the buyer
for the risk associated with the unfunded portion of the facility—in that at some point in the future, the buyer
may need to provide the unfunded portion, in full, to the borrower. This part of the transaction is referred to as
the netback, and is calculated based on the inverse of the price. The closer the facility trades to par, the less risky
it is, and the less the netback compensation will be.
The calculation for the cost of the funded portion is:
(Percent owned × Funded portion) × Price*
The calculation for the netback is:
(Percent owned × Unfunded portion) × (1-Price*)
* Multiplied by the credit facility’s trading and pricing factors.
The investor’s total cost is the cost of the funded portion less the netback.
After the purchase settles, if the borrower:
 Reduces the facility’s commitment (which reduces the facility’s unfunded portion), the netback for the reduced
amount is treated as realized gain.
 Draws down additional funds from a facility, the buyer must pay (percentage owned × drawdown amount) to
fund the drawdown.

NOTE The Expanding Bank Debt Knowledge hands-on workshop includes a lesson on how to calculate the cost of
multi-currency bank debt.

Example: Calculating the Cost of a Term Loan

Hillary Hunter purchases 10% of a $1,000,000 term loan at 90. Her cost:
= (Percentage owned × Total facility amount) × Price*
= (.10 × $1,000,000) × .90
= $100,000 × .90 = $90,000
* The price reflects the credit facility’s trading and pricing factors.

12
 Calculating the Cost of Bank Debt

Example: Calculating the Cost of a Revolver

Hillary Hunter purchases 10% of a $10,000,000 credit facility at 90. The funded portion of this credit facility is
$5,000,000, and the unfunded portion is $5,000,000.
The cost of the funded portion:
= (Percentage owned × Funded portion) × Price*
= (.10 × $5,000,000) × .90
= $500,000 × .90 = $450,000
The calculation of the netback:
= (Percentage owned × Unfunded portion) × (1 - Price*)
= (.10 × $5,000,000) × (1 - .90)
= $500,000 × .10 = $50,000
* The price reflects the credit facility’s trading and pricing factors.
The investor’s total cost is the cost of the funded portion less the netback, or $450,000 - $50,000 = $400,000.
At some point in the future, if Hillary provides $500,000 in funds to the borrower, the net effect for her will be
only $450,000 (or $0.90 on the dollar), because of the $50,000 netback she received with her original purchase.

Exercise 9: Prove out the cost.

Prove out the cost of the revolver credit facility.
1 In the Select Report screen, find and select the Cash Appraisal report.

2 On the Basic tab, enter these values.

Portfolio XXX_BankDebt
Period End Date 08/15/2011

3 Submit the report. Compare your report to the one on the following page, and then complete the information
below.

Credit Facility Cost

1 Funded and unfunded The total facility amount is $10,000,000.

portions After the first drawdown of $1,000,000, the funded portion is:
$
The unfunded portion is:
$

2 Cost of funded portion (Percent Owned × Total Facility Funded Portion) × (Price Factor)
= (10% × $1,000,000) × (95 × .01)
=$ × .95 = $

13
Lesson 1 Setting Up Bank Debt

Credit Facility Cost

3 Netback The calculation for the netback is:

(Percent Owned × Total Facility Unfunded Portion)
× [1-(Price × Trading Factor)]
= (10% × $9,000,000) × [1-(95 × .01)]
= $900,000 × .05
=$

4 Total cost The investor’s total cost is the cost of the funded portion less the netback, or:
$ -$ =$

14
 Updated Through: 07/26/2017 11:32:56
Working with Bank Debt InventoryState: InCustody
Reporting Currency: USD

CASH APPRAISAL Reporting Date: 08/15/2011

Book Unrealized
Description Invest ID Quantity FX Rate Cost Book Market Value Book Gain/Loss % Invest
Short Positions -50,000.00 -50,000.00 0.00 100.00 %
JP Morgan Equity Account -50,000.00 -50,000.00 0.00 100.00 %
U.S. Dollars USD -50,000.000 1.0000 -50,000.00 -50,000.00 0.00 100.00 %

15
Calculating the Cost of Bank Debt
Lesson 1 Setting Up Bank Debt

Exercise 10: Run the Credit Facility Contract History report.

The Credit Facility Contract History report displays all of the activity affecting each of the credit contracts associated
with the credit facilities that the portfolio holds, including Credit Activity, Interest Receipt, and Maturity transactions.
1 In the Select Report screen, find and select the Credit Facility Contract History report.

2 On the Basic tab, enter these values.

Portfolio XXX_BankDebt
Period End Date 08/31/2011

3 Submit the report. Compare your report to the one on the following page. Note the transaction descriptions.

16
 Updated Through: 07/26/2017 11:32:56
Working with Bank Debt Reporting Currency: USD

CREDIT FACILITY CONTRACT HISTORY Reporting Period: 01/01/1950 - 08/31/2011

Unrealized
Trade/Acct Global Contract Pro-Rata Accrued Realized Carried Effective Amortized
Date Settle Date Tran No Transaction Amount Pro-Rata % Quantity Local Amount Book Amount Amortization Amortization Amortization Yield price
Topflight Airlines Credit Facility (USD)
Contract1_Topflight_Airlines (USD)
07/28/2011 07/28/2011 1009563 Drawdown (Funded) 1,000,000.000 100.000000 1,000,000.000 0.00 0.00 0.00 0.00 0.00 0.00 0.00
08/02/2011 08/11/2011 1009564 Buy 100,000.000 100,000.00 100,000.00 0.00 0.00 0.00 0.00 0.00
08/28/2011 08/28/2011 1009569 Interest 271.53 271.53 0.00 0.00 0.00 0.00 0.00
Topflight Airlines Credit Facility (Unfunded)
08/02/2011 08/11/2011 1009564 Buy 900,000.00 900,000.00 0.00 0.00 0.00 0.00 0.00

17
Calculating the Cost of Bank Debt
Lesson 1 Setting Up Bank Debt

Working with Accrual Contracts

Fees for accrual contracts are based on holdings during a specified period. Like fees for credit contracts, fees for
accrual contracts can be paid over any period of time. These fees are accrued along with earned interest, and are
received on payment date with no additional seed money being provided to the borrower.
Although accrual contract fees may be paid in the same fashion as credit contract fees, sometimes accrual contract
fees are paid to the holder for the entire accrual period (like a bond), but accrued interest is not transferred on actual
settlement date.

Exercise 11: Define an accrual contract.

1 On the Credit Facility Definition screen’s Investment field, select XXX_Topflight_Airlines_Credit_Facility, and then
press TAB.
2 Click the Credit Contracts tab.

3 Click Insert Row . This opens the Credit Contract Definition screen.
TIP Notice that the Credit Facility field in this screen is defined automatically as
XXX_Topflight_Airlines_Credit_Facility. When you create a credit contract directly from a credit facility’s Credit
Facility Definition screen, the credit contract you create is linked automatically to that credit facility.
4 Enter these values.

Contract XXX_Topflight_Ticking_Fee
Description XXX_Topflight_Ticking_Fee
Accrual Contract Select this check box.
Issue Date 07/28/2011
Dated Date 07/28/2011
Maturity Date 09/30/2011
Coupon Frequency Quarterly
Local Basis Currency USD

Press TAB to enter USD in the remaining required currency fields.

5 In the Variable Rate Schedule section, in the grid, enter these values.

Commit Type Date Rate/Spread Price Override

insert 07/28/2011 2.0 2.0

6 Add and close the record.

Exercise 12: Record a drawdown against the contract.

1 In the Credit Activity Transaction screen, enter a drawdown for the X XX_Topflight_Airlines_Credit_Facility credit
facility for the GDTP portfolio. Also define the following for the drawdown:
 The Activity as Drawdown
 The Event Date as 07/28/2011
 Select the Accrual Activity check box.

18
 Working with Accrual Contracts

 The Contract as XXX_Topflight_Ticking_Fee

 The New Amount as 1,000,000
2 Add and close the record.

Exercise 13: Run the Credit Facility Contract Detail report.

1 In the Select Report screen, find and select the Credit Facility Contract Detail report.

2 On the Basic tab, enter these values.

Portfolio XXX_BankDebt
Period End Date 08/15/2011

3 Submit the report. Compare your report to the one on the following page.

19
20
Lesson 1 Setting Up Bank Debt

Updated Through: 07/26/2017 11:47:14

Working with Bank Debt Reporting Currency: USD

CREDIT FACILITY CONTRACT DETAIL Reporting Date: 08/15/2011

Interest Accrual
Global Funded/Unfunded Pro-Rata % Local Quantity FX Rate Book Quantity Start Date End Date Rate From Date Days Local Accrued Interest Book Accrued Interest
Topflight Airlines Credit Facility (USD) 197.06
Topflight Airlines Credit
10.000000 900,000.00 900,000.00 61.64 61.64
Facility (Unfunded)
9,000,000.00 10.000000 900,000.00 1.000 900,000.00 07/01/2011 07/01/2041 0.5000 08/11/2011 5 61.64 61.64
Contract1_Topflight_Airline
10.000000 100,000.00 100,000.00 79.86 79.86
s (USD)
1,000,000.00 10.000000 100,000.00 1.000 100,000.00 07/28/2011 09/30/2011 5.7500 08/11/2011 5 79.86 79.86
TickingFee_Topflight_Airline
0.000000 100,000.00 100,000.00 55.56 55.56
s (USD)
100,000.00 1.000 100,000.00 07/28/2011 09/30/2011 4.0000 08/11/2011 5 55.56 55.56
Total Funded 100,000.00
Total UnFunded 900,000.00
Total Commitment 1,000,000.00
 Summary

Exercise 14: Delete your previous transactions.

Before you proceed, run the Transaction History to delete the transactions you created in previous exercises.
1 Choose Search → History → Transaction History.

2 Enter these values.

Portfolio Geneva Dependent Transaction Pool

Investment XXX_Topflight_Airlines_Credit_Facility

3 Click Run Query .

4 Highlight the last Credit Activity transaction dated 07/28/2011 (the Credit Activity transaction for the accrual
contract), and click Delete .
5 Click OK, click OK again, and then close the screen.

Summary
In this lesson, you:
 Learned about credit facility setup tasks.
 Defined a revolver credit facility.
 Learned about credit activity events and transaction descriptions.
 Defined a global facility amount.
 Defined credit contracts.
 Entered a drawdown against a credit contract.
 Purchased a credit facility.
 Ran credit facility reports.
 Proved out cost.
 Worked with accrual contracts.

21
LESSON 2

Understanding Accrued Interest and Delayed

Compensation

Includes
Understanding Accrued Interest on Bank Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
About Interest Accrual on Funded and Unfunded Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Understanding Interest Accrual for Trades that Settle on Time. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Understanding Interest Accrual for Trades with a Delayed Settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

23
Lesson 2 Understanding Accrued Interest and Delayed Compensation

Understanding Accrued Interest on Bank Debt

Bank debt usually settles 20 days after trade date (seven days for bank debt traded at or near par, and ten days for
LMA trades). Bank debt settles without accrued interest, meaning that the interest that has accrued as of the trade
date is not included in the cost of the investment.
The following factors impact interest accrual on bank debt.
 (For revolvers) Whether the interest accrues on the funded or unfunded portion of the bank debt.
 Whether the bank debt is par/near par, distressed, or subject to LMA rules.
 Whether or not a lag period exists between the contractual settlement date of the trade (when the buyer and
seller agree to settle the transaction) and the actual settlement date—and whether or not interest payments
occur during this lag period.

About Interest Accrual on Funded and Unfunded Debt

For revolvers, investors earn interest on both the funded and unfunded portions of the debt. Geneva calculates
interest for the funded portion using the rates, dates, and settings defined for each credit contract. When a portfolio
purchases part of a facility, it earns interest on a pro-rata basis for each open contract. Typically, this interest accrues
at a variable rate on an Actual/360 calendar.
Geneva calculates interest on the unfunded portion of a revolver (also called the “commitment fee”) using the rates,
dates, and settings defined for the credit facility. Typically, this interest accrues at an 0.5% fixed rate on an Actual/365
calendar.

Understanding Interest Accrual for Trades that Settle on Time

As a rule, the buyer of bank debt begins accruing interest on the actual settlement date.

Interest Accrual for Bank Debt Trades that Settle on Time

If a bank debt trade settles on time:

Contractual/Actual Settlement Next Interest
Trade Date Date (the same date) Payment Date

Interest accrues to seller Interest accrues to buyer

 The contractual and actual settlement dates are the same, and the buyer begins accruing interest on this date.
 In Geneva, the interest the buyer accrues between actual settlement date and the next interest payment date automatically
moves to cash on the next interest payment date.

Keep in mind that the number of days between settlement date and report date also impacts the amount of accrued
interest on a report. Because par/near par trades settle sooner than distressed bank debt trades, a month-end report
will likely show larger amounts of accrued interest for par/near par trades, and smaller amounts for distressed bank
debt trades.

24
 Understanding Interest Accrual for Trades that Settle on Time

Trade Date Contractual/Actual Report Date

08/02/2011 Settlement Date 08/11/2011 08/31/2011

Par/near par bank debt

Interest accrues to seller Interest accrues to buyer

Trade Date Contractual/Actual Report Date

08/02/2011 Settlement Date 08/30/2011 08/31/2011

Distressed bank debt

Interest accrues to seller

Interest accrues to buyer

Exercise 15: Prove out accrued interest for a par/near par bank debt trade.
Prove out accrued interest for a par/near par trade where contractual and actual settlement dates are the same.
Prove out interest on the Credit Facility Contract Detail report.
1 Run the Credit Facility Contract Detail report for the XXX_BankDebt portfolio, with a Period End date of
08/31/2011.
2 Compare your report to the one on the following page, and then complete the information below.

Accrued interest on the funded portion of bank debt as of 08/31/2011

1 Per Annum Interest

$ x 5.75% =$
Funded Portion (Spread + Index Rate) Per Annum Interest

2 Daily Interest
$ / 360 = $
Per Annum Interest (from step 1) # of days in a year Daily Interest

3 Accrued Interest between 08/11 and The report reflects 21 days of interest accrual between 08/11/2011 (actual
08/31 settlement date) and 08/31/2011 (period end date).
$ x 21 = $
Daily Interest (from step 2) # of accrual days Accrued Interest

Accrued interest on the unfunded portion of bank debt as of 08/31/2011

1 Per Annum Interest

$ x 0.5% = $
Unfunded Portion (Spread + Index Rate) Per Annum Interest

25
Lesson 2 Understanding Accrued Interest and Delayed Compensation

Accrued interest on the unfunded portion of bank debt as of 08/31/2011

2 Daily interest
$ / 365 = $
Per Annum Interest (from step 1) # of days in a year Daily Interest

3 Accrued interest between 08/11 and The report reflects 21 days of interest accrual between 08/11/2011 (actual
8/31 settlement date) and 08/31/2011 (period end date).
$ x 21 = $
Daily Interest (from step 2) # of accrual days Accrued Interest

26
 Updated Through: 07/26/2017 11:58:18
tŽƌŬŝŶŐǁŝƚŚĂŶŬDebt Reporting Currency: USD

CREDIT FACILITY CONTRACT DETAIL Reporting Date: 08/31/2011

Interest Accrual
Global Funded/Unfunded Pro-Rata % Local Quantity FX Rate Book Quantity Start Date End Date Rate From Date Days Local Accrued Interest Book Accrued Interest
Topflight Airlines Credit Facility (USD) 594.32
Topflight Airlines Credit
10.000000 900,000.00 900,000.00 258.90 258.90
Facility (Unfunded)
9,000,000.00 10.000000 900,000.00 1.000 900,000.00 07/01/2011 07/01/2041 0.5000 08/11/2011 21 258.90 258.90
Contract1_Topflight_Airline
10.000000 100,000.00 100,000.00 335.42 335.42
s (USD)
1,000,000.00 10.000000 100,000.00 1.000 100,000.00 07/28/2011 09/30/2011 5.7500 08/11/2011 21 335.42 335.42
Total Funded 100,000.00
Total UnFunded 900,000.00
Total Commitment 1,000,000.00

27
Understanding Interest Accrual for Trades that Settle on Time
Lesson 2 Understanding Accrued Interest and Delayed Compensation

Exercise 16: Prove out accrued interest for a distressed bank debt trade.
Prove out accrued interest for a distressed bank debt trade where contractual and actual settlement dates are the
same.
Update your portfolio’s Buy transaction to reflect a purchase of distressed bank debt. Then review the effect on the
Credit Facility Contract Detail report.
1 Open the Buy transaction you created in Exercise 7.

 In the Trades As field, select Distressed. Note that the Contractual and Actual field values automatically change
from 08/11/2011 to 08/30/2011.
 Change the price from 95 to 80.
2 Click Update , click OK, and then close the record.
3 Run the Credit Facility Contract Detail report for the XXX_BankDebt portfolio, with a Period End date of
08/31/2011.
4 Compare your report to the one on the following page, and then complete the information below.

Accrued interest on the funded portion of bank debt as of 08/31/2011

1 Per Annum Interest

$ x 5.75 =$
Funded Portion (Spread + Index Rate) Per Annum Interest

2 Daily Interest
$ / 360 = $
Per Annum Interest # of days in a year Daily Interest
(from step 1)

3 Accrued Interest between 08/30 and The report reflects 2 days of interest accrual between 08/30/2011
08/31 (contractualsettlement date) and 08/31/2011 (period end date).
$ x 2 = $
Daily Interest (from step 2) # of accrual days Accrued Interest

Accrued interest on the unfunded portion of bank debt as of 08/31/2011

1 Per Annum Interest

$ x 0.5% =$
Unfunded Portion Interest rate Per Annum Interest

2 Daily Interest
$ / 365 = $
Per Annum Interest # of days in a year Daily Interest
(from step 1)

3 Accrued Interest between 08/30 and The report reflects 2 days of interest accrual between 08/30/2011
08/31 (contractual settlement date) and 08/31/2011 (period end date).
$ x 2 = $
Daily Interest (from step 2) # of accrual days Accrued Interest

28
 Updated Through: 07/26/2017 12:02:34
tŽƌŬŝŶŐǁŝƚŚBankDebt Reporting Currency: USD

CREDIT FACILITY CONTRACT DETAIL Reporting Date: 08/31/2011

Interest Accrual
Global Funded/Unfunded Pro-Rata % Local Quantity FX Rate Book Quantity Start Date End Date Rate From Date Days Local Accrued Interest Book Accrued Interest
Topflight Airlines Credit Facility (USD) 56.60
Topflight Airlines Credit
10.000000 900,000.00 900,000.00 24.66 24.66
Facility (Unfunded)
9,000,000.00 10.000000 900,000.00 1.000 900,000.00 07/01/2011 07/01/2041 0.5000 08/30/2011 2 24.66 24.66
Contract1_Topflight_Airline
10.000000 100,000.00 100,000.00 31.94 31.94
s (USD)
1,000,000.00 10.000000 100,000.00 1.000 100,000.00 07/28/2011 09/30/2011 5.7500 08/30/2011 2 31.94 31.94
Total Funded 100,000.00
Total UnFunded 900,000.00
Total Commitment 1,000,000.00

29
Understanding Interest Accrual for Trades that Settle on Time
Lesson 2 Understanding Accrued Interest and Delayed Compensation

Understanding Interest Accrual for Trades with a Delayed Settlement

If a bank debt trade has a delayed settlement (which means that it does not settle on its contractual settlement date),
Geneva uses the same method to calculate interest accrual for par/near par bank debt, distressed bank debt, and
bank debt subject to LMA rules. One consequence of delayed settlement is that the buyer or the seller may owe the
other party delayed compensation.

What is delayed compensation?

Rules have been established to ensure that neither party benefits monetarily by delaying the settlement
of a trade. For this reason, both the buyer and the seller pay delayed compensation if a trade does not
settle on time.
KEY CONCEPT

Delayed compensation is the difference between:

 Cost of Carry (the cost of carrying a position). The buyer pays the seller Cost x Average Index Rate. On
JE Lines in Geneva, this amount appears as Delayed Compensation.
and
 Interest on the Funded Portion. The seller pays the buyer the All-in Rate on the funded portion of the
bank debt between the contractual and actual settlement dates.On JE Lines in Geneva, this amount
appears either as an Interest Receipt or an Interest Expense.

Whether the bank debt is par/near par, distressed, or subject to LMA rules, Geneva uses the same method to
calculate delayed compensation:
 The buyer begins accruing interest on the actual settlement date.
 If the trade does not settle on the contractual settlement date:
 The buyer may owe the seller cost of carry (this posts in Geneva as Delayed Compensation).
 The seller may owe the buyer delayed compensation (this posts in Geneva as an Interest Receipt). The buyer
deducts this amount from the total owed to the seller on the actual settlement date.
When you enter trades for bank debt subject to delayed compensation, you must specify:
 A “Trades As” value of Par/Near, Distressed, LMA, or None. Geneva then sets default values for Contractual and
Actual settlement dates, based on settings defined for the specified credit facility.
 A “Delayed Compensation” value, to specify a method for calculating delayed compensation.
Most reports include delayed compensation in the credit facility’s interest accruals. Accounting reports such as the
Trial Balance report display delayed compensation as a separate item, however.
NOTE Geneva accrues delayed compensation based on the facility’s cost basis on the trade’s contractual settlement
date. Typically, if a facility’s cost basis changes by more than 25% between the contractual and actual settlement
dates, delayed compensation is recalculated based on the cost on the actual settlement date. This feature is planned
for a future Geneva release.

30
 Understanding Interest Accrual for Trades with a Delayed Settlement

Exercise 17: Define a delayed compensation method.

1 Choose Define → Reference → Cost of Carry.

2 Enter these values.

Cost of Carry Code Average_Libor_#

Description Average Libor_#
Rate 3.0
Accrual Days Per Year 360
3 Add and close the record.

Exercise 18: Prove out accrued interest and delayed compensation for a par/near par bank debt trade.
Prove out accrued interest and delayed compensation for a par/near par trade with a delayed settlement date and an
interest payment between contractual and actual settlement dates.
Update your portfolio’s Buy transaction to reflect a par/near par trade with a delayed settlement date. Then review
the effect on the Journal Entries By Accounting Date report.
1 Open the Buy transaction you created in Exercise 7.

 In the Trades As field, select Par/Near.

 Change the price from 80 to 95.
 Enter 08/11/2011 as the contractual settlement date and 09/12/2011 as the actual settlement date.
 In the Cost of Carry field, select Average Libor_#.
2 Update and close the record.

3 Open the XXX_Topflight_Airlines_Contract1 credit contract. Change the Coupon Frequency from Quarterly to
Monthly.
4 Update and close the record.

5 Run the Journal Entries By Accounting Date report for the XXX_BankDebt portfolio, with a Period End date of
09/29/2011.
6 Compare your report to the one on the following pages, and then complete the information below.

Date Journal entries

08/02/2011 1,000,000 shares of the credit contract are booked as a Receivable.

$50,000 is booked as Payable, reflecting the cost of the contract (which you proved out in Exercise 9).

08/11/2011 This is the contractual settlement date.

The Receivable and Payable amounts from 08/02, both related to the purchase, move into
OverdueReceivable and OverduePayable accounts.

08/28/2011 This is the interest payment date.

$271.53 is booked as an InterestReceipt for the credit facility. This represents interest received between
the contractual settlement date 08/11 and the interest payment date 08/28.
Note that $271.53 is also booked as a CouponInterestReceivable amount.

31
Lesson 2 Understanding Accrued Interest and Delayed Compensation

Prove out the InterestReceipt amount received on the funded amount between contractual settlement date 08/11 and
Interest receipt date 08/28.

1 Per Annum Interest $ × 5.75% = $

Funded portion Interest rate Per Annum Interest

2 Daily Interest
$ / 360 = $
Per Annum Interest # of days in a year Daily Interest
(from step 1)

3 InterestReceipt amount $ x 17 = $
Daily Interest # of accrual days InterestReceipt amount
(from step 2)

Prove out the InterestReceipt amount received on the funded amount between 08/28 and actual settlement date 09/12.

1 Per Annum Interest $ × 5.75% = $

Funded portion Interest rate Per Annum Interest

2 Daily Interest
$ / 360 = $
Per Annum Interest # of days in a year Daily Interest
(from step 1)

3 InterestReceipt amount $ x 15 = $
Daily Interest # of accrual days InterestReceipt
(from step 2) amount

Prove out the DelayedSettlementInterestExpense (Cost of Carry) amount for the period between the contractual
settlement date 08/11 and the actual settlement date 09/12.

DelayedSettlementInterestExpense (Cost of
Carry) amount $ x / 360
Cost Average LIBOR rate # of days in a year
(from Ex. 13)
=$ x 32
# of accrual days

=$
DelayedSettlementInterestExpense (Cost of Carry) amount

Prove out the UnfundedLiabilityInterestReceipt (accrued interest) amount on the unfunded portion between
contractual settlement date 08/11 and actual settlement date 09/12.

1 Per Annum Interest $ × 0.5% = $

Unfunded portion Interest rate Per Annum Interest

32
 Understanding Interest Accrual for Trades with a Delayed Settlement

2 Daily Interest
$ / 365 = $
Per Annum Interest # of days in a year Daily Interest
(from step 1)

3 UnfundedLiabilityInterestReceipt $ x 32
(accrued interest) amount Daily interest # of accrual days
(from step 2)

= $
UnfundedLiabilityInterestReceipt (accrued interest) amount

Date Journal entries

09/12/2011 This is the actual settlement date.

The OverdueReceivable and OverduePayable amounts from 08/11/2011 move into OnHand accounts.
These amounts represent the actual settlement of the contract shares and the purchase cost.
The $49,227.70 credit recorded for the OnHand account represents the amount the buyer ends up paying
for the credit facility—somewhat less than originally planned.

$50,000.00 Negotiated cost

- ($271.53) All-in Rate between contractual settlement & interest payment dates
($239.58) All-in Rate between interest payment & actual settlement dates
($394.52) Accrued interest on the unfunded portion between contractual & actual
settlement dates
+ $133.33 Cost of Carry
$49,227.70 Adjusted cost
The ($271.53) and ($239.58) amounts, in total, equal the accrued interest that the buyer received as of
contractual settlement date ($511.11).
As noted above, the ($394.52) amount represents the interest on the unfunded portion of the bank debt.
Note the CouponInterestReceivable amount of $271.53 recorded on 09/12/2011. This reverses the
CouponInterestReceivable amount of $271.53 recorded on 08/28/2011.

09/28/2011 This is the interest payment date for September.

The funded portion of the credit facility pays $255.56 as interest, which increases the value of the buyer’s
OnHand account. This amount represents the interest accrued between the actual settlement date 09/12
and the interest payment date 09/28.

33
Lesson 2 Understanding Accrued Interest and Delayed Compensation

Prove out the InterestReceipt (to OnHand account) amount between actual settlement date
09/12 and interest payment date 09/28.

1 Per Annum Interest

$ × 5.75% = $
Funded portion (Spread + Index Rate) Per Annum Interest

2 Daily Interest
$ / 360 = $
Per Annum Interest # of days in a year Daily Interest
(from step 1)

3 InterestReceipt (to OnHand

account) amount $ x 16 =$
Daily Interest # of accrual days InterestReceipt (to OnHand account)
(from step 2) amount

Date Journal Entries

09/29/2011 This is the day before the maturity date.

The buyer receives:
 $31.94 of interest accrued on the funded portion between the last interest payment date 09/28
and the report date 09/29.
 $221.92 of interest accrued on the unfunded portion between actual settlement date 09/12 and
the report date 09/29.

Prove out the AccruedInterestLong amount on the funded portion between the last interest payment 09/28 and report
date 09/29.

1 Per Annum Interest

$ × 5.75% = $
Funded portion (Spread +Index Rate) Per Annum Interest

2 Daily Interest
$ / 360 = $
Per Annum Interest # of days in a year Daily Interest
(from step 1)

3 AccruedInterestLong
amount $ x 2 = $
Daily Interest # of accrual days AccruedInterestLong
(from step 2) amount

34
 Understanding Interest Accrual for Trades with a Delayed Settlement

Prove out the ChangeInUnfundedLiabilityAccruedInterestLong amount on the unfunded portion between actual
settlement date 09/12 and the report date 09/29.

1 Per Annum Interest

$ × 0.5% = $
Unfunded portion Interest rate Per Annum Interest

2 Daily Interest
$ / 365 = $
Per Annum Interest # of days in a year Daily Interest
(from step 1)

3 ChangeInUnfundedLiabilityAccrue $ x 18
dInterestLong amount Daily Interest # of accrual days
(from step 2)
=$
ChangeInUnfundedLiabilityAccruedInterestLong amount

35
36
Updated Through: 07/26/2017 12:07:14
tŽƌŬŝŶŐǁŝƚŚĂŶŬĞďƚ Reporting Currency: USD

JOURNAL ENTRIES BY ACCOUNTING DATE Reporting Period: 01/01/1950 - 09/29/2011

Reference
Acct Date Trade Date Tran ID Tran Description Investment ID Tran ID Lot ID L/S Financial Account Quantity Debit Credit
Topflight_Airlines_Credit
08/02/2011 08/02/2011 1009568 Buy 1009568 L Receivable 1,000,000.000 950,000.00 0.00
_Facility1A
1009568 L UnfundedLiability 0.000 0.00 900,000.00
USD 1009568 S Payable -50,000.000 0.00 50,000.00
Total Debits and Credits- 950,000.00 950,000.00
Topflight_Airlines_Credit
08/11/2011 08/02/2011 1009568 Buy-Settlement 1009568 L OverdueReceivable 1,000,000.000 950,000.00 0.00
_Facility1A
1009568 L Receivable -1,000,000.000 0.00 950,000.00
USD 1009568 S OverduePayable -50,000.000 0.00 50,000.00
1009568 S Payable 50,000.000 50,000.00 0.00
Total Debits and Credits- 1,000,000.00 1,000,000.00
Contract1_Topflight_Airl DelayedCompCouponInterestReceiva
08/28/2011 08/28/2011 1009732 Interest 1009568 L 271.530 271.53 0.00
ines1A ble
Topflight_Airlines_Credit
1009568 L DelayedCompPendingTradeAIRevExp 0.000 0.00 271.53
_Facility1A
Total Debits and Credits- 271.53 271.53
Contract1_Topflight_Airl DelayedCompCouponInterestReceiva
09/12/2011 08/02/2011 1009568 Buy 1009568 L -271.530 0.00 271.53
ines1A ble
Lesson 2 Understanding Accrued Interest and Delayed Compensation

Topflight_Airlines_Credit
1009568 L OnHand 1,000,000.000 950,000.00 0.00
_Facility1A
1009568 L OverdueReceivable -1,000,000.000 0.00 950,000.00
1009568 L CostOfCarryInterestExpense 0.000 133.33 0.00
1009568 L DelayedCompInterestReceipt 0.000 0.00 511.11
1009568 L DelayedCompPendingTradeAIRevExp 0.000 271.53 0.00
DelayedCompUnfundedLiabilityIntere
1009568 L 0.000 0.00 394.52
stReceipt
USD 1 S OnHand -49,227.700 0.00 49,227.70
1009568 S OverduePayable 50,000.000 50,000.00 0.00
Total Debits and Credits- 1,000,404.86 1,000,404.86
Topflight_Airlines_Credit
09/28/2011 09/28/2011 1009733 Interest 1009568 L InterestReceipt 0.000 0.00 255.56
_Facility1A
USD 1 S OnHand 255.560 255.56 0.00
Total Debits and Credits- 255.56 255.56

2017-07-26T09:08:54 Page 1 of 6
 Understanding Interest Accrual for Trades with a Delayed Settlement

Exercise 19: Prove out accrued interest and delayed compensation for a distressed bank debt trade.
Prove out accrued interest and delayed compensation for a distressed bank debt trade with a delayed settlement
date and an interest payment between contractual and actual settlement dates.
Update your portfolio’s Buy transaction to reflect a distressed bank debt trade with a delayed settlement date. Then
review the effect on the Interest Income Detail report.
1 Open the Buy transaction you created in Exercise 7.

 In the Trades As field, select Distressed.

 Change the price from 95 to 80.
 Enter 08/30/2011 as the Contractual settlement date, and 09/29/2011 as the Actual settlement date.
 In the Delayed Compensation field, select Standard.
2 Update and close the record.

3 Run the Interest Income Detail report for the XXX_BankDebt portfolio, with a Period End date of 09/29/2011.

4 Compare your report to the one on the following page, and then complete the information below.

Prove out the Buy-DelayedSettlementInterestReceipt (cost of carry) amount between contractual settlement date 08/30 and
actual settlement date 09/29.

1 Cost basis as of contractual Cost of Funded Portion = (Percent Owned × Total Facility Funded Portion) × (Price ×
settlement date 08/30 Trading Factor)
= (10% × $1,000,000) × (80 × .01)
= $100,000 × .80 = $80,000
Netback = (Percent Owned × Total Facility Unfunded Portion) × [1-(Price × Trading
Factor)]
= (10% × $9,000,000) × [1-(80 × .01)]
= $900,000 × (1-.80)
= $900,000 × (.20)
= $180,000
Cost Basis = Cost of Funded Portion - Netback
= $80,000 - $180,000
= ($100,000.00)

2 Per Annum Interest

$ x 3.75% = $
Cost Interest rate Per Annum
Interest

37
Lesson 2 Understanding Accrued Interest and Delayed Compensation

Prove out the Buy-DelayedSettlementInterestReceipt (cost of carry) amount between contractual settlement date 08/30 and
actual settlement date 09/29.

3 Daily Interest
$ / 365 = $
Per Annum Interest # of days in a year Daily Interest
(from step 2)

4 Buy-
DelayedSettlementInterestReceipt $ x 30
(cost of carry) amount Daily Interest (from step 3) # of accrual days
=$
Buy-DelayedSettlementInterestReceipt
(cost of carry) amount

Prove out the Interest-InterestReceipt amount on the funded portion between contractual settlement date 08/30 and actual
settlement date 09/29.

1 Per Annum Interest

$ x 5.75% =$
Funded portion (Spread + Index Rate) Per Annum Interest

2 Daily Interest
$ / 360 = $
Per Annum Interest # of days in a year Daily Interest
(from step 1)

3 Interest-InterestReceipt amount
$ x 29 = $
Daily Interest (from step 2) # of accrual days Interest-InterestReceipt
amount

Prove out the Buy-UnfundedLiabilityInterestReceipt amount on the unfunded portion between contractual settlement date
08/30 and actual settlement date 09/29.

1 Per Annum Interest

$ x 0.5% =$
Unfunded portion Interest rate Per Annum Interest

38
 Understanding Interest Accrual for Trades with a Delayed Settlement

Prove out the Buy-UnfundedLiabilityInterestReceipt amount on the unfunded portion between contractual settlement date
08/30 and actual settlement date 09/29.

2 Daily Interest
$ / 365 = $
Per Annum Interest # of days in a year Daily Interest
(from step 1)

3 Buy-
UnfundedLiabilityInterestReceipt $ x 30
amount Daily Interest (from step 2) # of accrual days

= $
Buy-UnfundedLiabilityInterestReceipt amount

Prove out the Change In AI And Amortization-ChangeInAccruedInterestLong amount on the funded portion as of actual
settlement date 09/29.

1 Per Annum Interest

$ x 5.75% =$
Funded portion (Spread + Index Rate) Per Annum Interest

2 Daily Interest
$ / 360 = $
Per Annum Interest # of days in a year Daily Interest
(from step 1)

3 Change In AI And Amortization- $ x 1

ChangeInAccruedInterestLong Daily Interest (from step 2) # of accrual days
amount =$
Change In AI And Amortization-ChangeInAccruedInterestLong

Prove out the ChangeInUnfundedLiabilityAccruedInterestLong amount on the unfunded portion as of actual settlement date
09/29.

1 Per Annum Interest

$ x 0.5% =$
Unfunded portion Interest rate Per Annum Interest

39
Lesson 2 Understanding Accrued Interest and Delayed Compensation

Prove out the ChangeInUnfundedLiabilityAccruedInterestLong amount on the unfunded portion as of actual settlement date
09/29.

2 Daily Interest
$ / 365 =$
Per Annum Interest # of days in a year Daily Interest
(from step 1)

3 ChangeInUnfundedLiabilityAccrued
InterestLong amount $ x 1
Daily Interest (from step 2) # of accrual days

=$
ChangeInUnfundedLiabilityAccruedInterestLong amount

TIP For investments that trade flat, the buyer begins accruing interest on the actual settlement date. If
you select the Trades Flat check box in a Buy transaction, reports will not reflect interest accrual
between contractual and actual settlement dates. Instead, reports will show the interest beginning to
accrue on actual settlement.

40
 Updated Through: 07/26/2017 12:14:01
tŽƌŬŝŶŐǁŝƚŚĂŶŬĞďƚ Reporting Currency: USD

INTEREST INCOME DETAIL Reporting Period: 01/01/1950 - 09/29/2011

Investment Security ID Day Count Maturity Quantity Interest Rate Pay Freq Trade Date Settle Date Local Amount Book Amount
Revenues 1,185.54
Bank Debt 1,185.54
U.S. Dollars 1,185.54 1,185.54
Topflight Airlines Credit Facility 1,185.54 1,185.54
Buy-CostOfCarryInterestReceipt Topflight_Airlines_Cr Actual/365 07/01/2041 1,000,000.000 Quarterly 08/02/2011 08/30/2011 308.22 308.22
edit_Facility1A
Buy-DelayedCompInterestReceipt Topflight_Airlines_Cr 1,000,000.000 Quarterly 08/02/2011 08/30/2011 479.16 479.16
edit_Facility1A
Buy-DelayedCompUnfundedLiabilityInterestReceipt Topflight_Airlines_Cr 1,000,000.000 Quarterly 08/02/2011 08/30/2011 369.86 369.86
edit_Facility1A
Change In AI And Amortization- Topflight_Airlines_Cr 15.97 15.97
ChangeInAccruedInterestLong edit_Facility1A
Change In AI And Amortization- Topflight_Airlines_Cr 12.33 12.33
ChangeInUnfundedLiabilityAccruedInterestLong edit_Facility1A
TOTAL INTEREST INCOME 1,185.54

41
Understanding Interest Accrual for Trades with a Delayed Settlement
Lesson 2 Understanding Accrued Interest and Delayed Compensation

Summary
In this lesson, you:
 Learned about interest accrual on funded and unfunded portions of bank debt.
 Proved out interest for par/near par trades where contractual and actual settlement dates were the same, and
where there was a delayed settlement.
 Proved out interest for distressed bank debt where contractual and actual settlement dates were the same, and
where there was a delayed settlement.
 Proved out delayed compensation for trades with a delayed settlement.
 Reviewed interest accrual for distressed bank debt that traded flat.

42
LESSON 3

Entering Credit Activity Transactions

Includes
Understanding Credit Facility Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Working with Rollovers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Entering Commitment Increases, Reductions, and Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Closing Credit Facility Positions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

43
Lesson 3 Entering Credit Activity Transactions

Understanding Credit Facility Transactions

You use various transactions to record different types of credit facility events. For example, you use a Buy transaction
to open a credit facility position, and Credit Activity transactions to either define facility amounts or record activities
for individual contracts.
Since Credit Activity transactions record so many different types of events, you’ll typically use transaction
descriptions to distinguish between them (for example, Define Global Amount, Drawdown, and so on). (You learned
about transaction descriptions in Chapter 2. For details, see “About Credit Activity Events and Transaction
Descriptions” on page 5.)
You can enter the following transactions (and only these transactions) for credit facilities.

 Accounting Related  Expense

 Adjust Cost-Capitalize  Gross Amount Interest
 Adjust Cost-Realized  Interest Receipt
 Buy  Mature
 Buy Transaction Distribution  Receive Long
 Commission Settlement  Receive Short
 Cover Short  Reclaim Receipt
 Cover Short transaction distribution  Revenue
 Credit Activity  Sell
 Deliver Long  Sell Transaction distribution
 Deliver Short  Sell Short
 Dependent Event Reorganization  Sell Short Transaction Distribution

Working with Rollovers

You can specify two types of rollovers when you enter a Credit Activity transaction.
 Rollover No Interest, in which the borrower rolls over a “placeholder” contract without recognizing the interest
accrued on it.
 Rollover With Interest, in which the borrower rolls over a maturing contract and recognizes the interest accrued
on it.
When you roll a maturing contract into one or more new contracts, the new contracts may reflect different terms,
such as prime rate instead of LIBOR, or 60- or 90-day rates instead of 30-day rates. The borrower pays the interest
and any fees due on the maturing contract.

IMPORTANT Use a “Rollover No Interest” Credit Activity transaction only if you created a
“placeholder” (temporary) contract initially, because the terms of the contract were not yet known or
finalized. When you use this type of transaction, Geneva writes off all the interest earned on the
original contract.

44
 Working with Rollovers

Exercise 20: Define a “placeholder” contract.

In some cases, you’ll need to define a contract without knowing anything other than its “all-in rate” (spread plus
index rate). In this exercise, you’ll update Contract 1 so that it reflects the terms of this type of “placeholder”
contract.
1 Open the XXX_Topflight_Airlines_Contract1 credit contract.

2 Change the maturity date from 09/30/2011 to 10/01/2020.

3 Update and close the record.

Exercise 21: Define Credit Contract 2, and update your Buy transaction.
After finding out actual details about your placeholder contract, you record them in a new contract called Contract 2.
You’ll also update the actual settlement date in your Buy transaction.
1 On the Credit Facility Definition screen’s Investment field, select XXX_Topflight_Airlines_Credit_Facility, and then
press TAB.
2 Click the Credit Contracts tab.

3 Click Insert Row . This opens the Credit Contract Definition screen.
4 Enter these values.

TIP Notice that the Credit Contract Definition screen’s Credit Facility field is defined automatically as
XXX_Topflight_Airlines_Credit_Facility. When you create a credit contract directly from a credit facility’s Credit
Facility Definition screen, the credit contract is linked automatically to that credit facility.
Contract XXX_Topflight_Airlines_Contract2
Description Topflight Airlines Contract 2
Contract Type LIBOR
Issue Date 07/28/2011
Dated Date 07/28/2011
Maturity Date 09/30/2011
Coupon Frequency Quarterly
Accrual Days/Month Actual
Accrual Days/Year 360
Local Basis Currency USD

Press TAB to enter USD in the remaining required currency fields.

5 In the Variable Rate Schedule section, in the grid, enter these values.

Commit Type Date Rate/Spread Price Override

insert 07/28/2011 3.00 3.25

6 Add and close the record.

7 Open the Buy transaction that you created in Exercise 7. Change the Actual date from 09/29/2011 to 09/15/2011.

8 Update and close the record.

45
Lesson 3 Entering Credit Activity Transactions

Exercise 22: Roll over a placeholder contract into a real one.

Now that you have set up Contract 2 with actual terms, you can roll over the “placeholder” Contract 1 into the “real”
Contract 2. You’ll use a “Rollover No Interest” transaction because you do not want to recognize any of the interest
calculated based on the inaccurate data in Contract 1.
1 Choose Transactions → Asset Servicing → Credit Activity.

2 Enter these values.

Portfolio GenevaDependentTransactionPool
Credit Facility XXX_Topflight_Airlines_Credit_Facility
Tran Description Rollover
Event Date 09/20/2011
3 In the Credit Contract Activity section, XXX_Topflight_Airlines_Contract1 (the placeholder contract), automatically
appears with a Current Amount of 1,000,000, a New Amount of 1,000,000, and an activity value of No Activity.
 Change the New Amount value to 0 (zero).
 Change the Activity Value to Rollover No Interest.
4 In the next row, for XXX_Topflight_Airlines_Contract2 (the contract with the actual terms), enter a New Amount
value of 1,000,000 and an Activity value of Drawdown.
NOTE In the Change in Amount column, Geneva automatically enters 1,000,000 for you. This reflects the difference
between the Current Amount and the New Amount. When you enter a drawdown, prepayment, or rollover, you
can enter either the change in the contract amount or the new contract amount, and Geneva will automatically
calculate whichever field value you skip. This way, if a third-party provides you the change in a contract amount,
you do not have to calculate the new amount manually—you can enter the change in the contract amount instead.
5 Add and close the record.

6 Run the Credit Facility Contract Detail report for the XXX_BankDebt portfolio, for the following dates.

 09/15/2011 (the actual settlement date)

 09/20/2011 (the date of the rollover)
7 Compare your reports to the ones on the following pages, and then complete the information below

46
 Updated Through: 07/26/2017 12:23:24
tŽƌŬŝŶŐǁŝƚŚBankDebt Reporting Currency: USD

CREDIT FACILITY CONTRACT DETAIL Reporting Date: 09/15/2011

Interest Accrual
Global Funded/Unfunded Pro-Rata % Local Quantity FX Rate Book Quantity Start Date End Date Rate From Date Days Local Accrued Interest Book Accrued Interest
Topflight_Airlines_Credit_Facility (USD) 28.30
Topflight_Airlines_Credit_Fa
10.000000 900,000.00 900,000.00 12.33 12.33
cility (Unfunded)
9,000,000.00 10.000000 900,000.00 1.0000 900,000.00 07/01/2011 07/01/2041 0.5000 09/12/2011 1 12.33 12.33
Topflight_Airlines Contract
10.000000 100,000.00 100,000.00 15.97 15.97
1 (USD)
1,000,000.00 10.000000 100,000.00 1.0000 100,000.00 07/28/2011 10/01/2020 5.7500 09/12/2011 1 15.97 15.97
Total Funded 100,000.00
Total UnFunded 900,000.00
Total Commitment 1,000,000.00

47
Working with Rollovers
48
Updated Through: 07/26/2017 12:23:24
tŽƌŬŝŶŐǁŝƚŚBankDebt Reporting Currency: USD
Lesson 3 Entering Credit Activity Transactions

CREDIT FACILITY CONTRACT DETAIL Reporting Date: 09/15/2011

Interest Accrual
Global Funded/Unfunded Pro-Rata % Local Quantity FX Rate Book Quantity Start Date End Date Rate From Date Days Local Accrued Interest Book Accrued Interest
Topflight_Airlines_Credit_Facility (USD) 28.30
Topflight_Airlines_Credit_Fa
10.000000 900,000.00 900,000.00 12.33 12.33
cility (Unfunded)
9,000,000.00 10.000000 900,000.00 1.0000 900,000.00 07/01/2011 07/01/2041 0.5000 09/12/2011 1 12.33 12.33
Topflight_Airlines Contract
10.000000 100,000.00 100,000.00 15.97 15.97
1 (USD)
1,000,000.00 10.000000 100,000.00 1.0000 100,000.00 07/28/2011 10/01/2020 5.7500 09/12/2011 1 15.97 15.97
Total Funded 100,000.00
Total UnFunded 900,000.00
Total Commitment 1,000,000.00
 Working with Rollovers

Exercise 23: Define Credit Contract 3.

Topflight’s current credit contract (Contract2) matures on 09/30/2011. They need funds, however, and elect to re-
borrow this line of credit. You track their new credit contract as Contract 3.
1 On the Credit Facility Definition screen’s Investment field, select XXX_Topflight_Airlines_Credit_Facility, and then
press TAB.
2 Click the Credit Contracts tab.

3 Click Insert Row . This opens the Credit Contract Definition screen.
4 Enter these values.

TIP Notice that the Credit Contract Definition screen’s Credit Facility field is defined automatically as
XXX_Topflight_Airlines_Credit_Facility. When you create a credit contract directly from a credit facility’s Credit
Facility Definition screen, the credit contract is linked automatically to that credit facility.
Contract XXX_Topflight_Airlines_Contract3
Description XXX Topflight Airlines Contract 3
Contract Type LIBOR
Issue Date 09/30/2011
Dated Date 09/30/2011
Maturity Date 07/01/2012
Coupon Frequency Monthly
Accrual Days/Month Actual
Accrual Days/Year 360
Local Basis Currency USD

Press TAB to enter USD in the remaining required currency fields.

5 In the Variable Rate Schedule section, in the grid, enter these values.

Commit Type Date Rate/Spread Price Override

insert 09/30/2011 3.0 3.55

6 Add and close the record.

Exercise 24: Record a rollover with interest.

When Contract 2 matures on 09/30/2011, you’ll roll it over into Contract 3. Track this event as a rollover transaction
with interest.
1 Choose Transactions → Asset Servicing → Credit Activity.

2 Enter these values.

Portfolio GenevaDependentTransactionPool
Credit Facility XXX_Topflight_Airlines_Credit_Facility
Tran Description Rollover

49
Lesson 3 Entering Credit Activity Transactions

Event Date 09/30/2011

3 In the Credit Contract Activity section, note that XXX_Topflight_Airlines_Contract2 is automatically entered with
a Current amount of 1,000,000 and an activity value of Rollover With Interest.
In the next row, enter XXX_Topflight_Airlines_Contract3. Enter a New Amount of 1,000,000. Note that, in the
Change in Amount column, Geneva automatically enters 1,000,000 for you. This reflects the difference between
the Current Amount and the New Amount.
4 Add and close the record.

5 Run the Credit Facility Contract Detail report for the XXX_BankDebt portfolio, with a Period End date of
10/01/2011.
6 Compare your report to the one on the following page, and then complete the information below.

Rollover from Contract 2 to Contract 3

1 Contract details Which contract appears on the report?

What is the interest rate for Contract3? , or
% spread
+ % index rate
= % Total
What is the contract’s issue date (“Start Date”)?
What is the contract’s maturity date (“End Date”)?

2 Accrued interest on funded

portion × 6.55% = $
Local Quantity Interest Rate Per Annum Interest

$ / 360 = $
Per Annum Interest # of days in a year Daily Interest
(from above)
$ × 2 days =$
Daily Interest 09/30/2011-10/01/2011 Accrued Interest
(from above)

3 Accrued interest on unfunded × 0.5% = $

portion Local Quantity Interest Rate Per Annum Interest

$ / 365 = $
Per Annum Interest # of days in a year Daily Interest
(from above)

$ × 1 day = $
Daily Interest 10/01/2011 Accrued Interest
(from above)

50
 Updated Through: 07/26/2017 12:14:01
tŽƌŬŝŶŐǁŝƚŚBankDebt Reporting Currency: USD

CREDIT FACILITY CONTRACT DETAIL Reporting Date: 10/01/2011

Interest Accrual
Global Funded/Unfunded Pro-Rata % Local Quantity FX Rate Book Quantity Start Date End Date Rate From Date Days Local Accrued Interest Book Accrued Interest
RS_FromEX20Topflight_Airlines_Credit_Facility (USD) 48.72
RS_FromEX20Topflight_Airli
nes_Credit_Facility 10.000000 900,000.00 900,000.00 12.33 12.33
(Unfunded)
9,000,000.00 10.000000 900,000.00 1.0000 900,000.00 07/01/2011 07/01/2041 0.5000 10/01/2011 1 12.33 12.33
RS_Contract3_FromEX20_To
10.000000 100,000.00 100,000.00 36.39 36.39
pflight_Airlines (USD)
1,000,000.00 10.000000 100,000.00 1.0000 100,000.00 09/30/2011 07/01/2012 6.5500 09/30/2011 2 36.39 36.39
Total Funded 100,000.00
Total UnFunded 900,000.00
Total Commitment 1,000,000.00

51
Working with Rollovers
Lesson 3 Entering Credit Activity Transactions

Entering Commitment Increases, Reductions, and Prepayments

Many agreements between lenders and borrowers do not prohibit the borrower from increasing or reducing their
line of credit. In Geneva, this appears as an increase or decrease in the global facility amount.

What’s the difference between a commitment reduction and a prepayment?

A commitment reduction decreases the line of credit available to the borrower. In Geneva, for a:
 Term loan, a commitment reduction must occur in conjunction with a contract maturing, and is called
KEY CONCEPT

a “paydown.”
 Revolver, a commitment reduction reduces the unfunded portion of the revolver.
In a prepayment scenario, the borrower pays back a portion of the investment’s funded portion. For a:
 Term loan, this decreases the global facility amount, but it does not bring it down to zero.
 Revolver, this does not impact the line of credit available to the borrower. It simply reduces the
funded portion of the facility, and increases the unfunded portion. At some point, the borrower may
borrow these same funds again.

Exercise 25: Record a commitment increase.

Topflight Airlines is increasing their credit line by $5,000,000, to $15,000,000.
1 Choose Transactions → Asset Servicing → Credit Activity.

2 Enter these values.

Portfolio GenevaDependentTransactionPool
Credit Facility XXX_Topflight_Airlines_Credit_Facility
Tran Description Commitment Increase
Event Date 10/15/2011

3 Select the Define Facility Amount check box, and then enter 15,000,000.00 in the New Facility Amount field. This
reflects the current global facility amount plus the increase to the unfunded portion of the revolver.
4 Add and close the record.

5 Run the Credit Facility Contract Detail report for the XXX_BankDebt portfolio, with a Period End date of
10/15/2011.
6 Compare your report to the one on the following page, and then complete the information below.

Funded and unfunded portions

1 Global Contract Amount (drawdown amount) $

2 Local Quantity
This represents 10% of $ , the global
contract (drawdown) amount.

52
 Entering Commitment Increases, Reductions, and Prepayments

Funded and unfunded portions

3 Total commitment owned by your portfolio $

This represents 10% of $ , the new global
facility amount, after the commitment increase.

4 Funded portion $
This represents 10% of $ , the global
contract (drawdown).

5 Unfunded portion $ , which equals the total commitment less

the funded portion.

Accrued interest on the funded portion of the bank debt between 09/30 and 10/15

1 Per annum interest Funded Portion × (Spread + Index Rate), or:

× 6.55% = $

2 Daily interest Per Annum Interest / Accrual Days Per Year, or:
$ / 360 days = $

3 Accrued interest between 16 days × $ =$

09/30 and 10/15

Accrued interest on the unfunded portion of the bank debt between 10/01 and 10/14

1 Per annum interest Unfunded Portion × (Spread + Index Rate), or:

× 0.5% = $

2 Daily interest Per Annum Interest / Accrual Days Per Year, or:
$ / 365 days = $

3 Accrued interest between 14 days × $ = $

10/01 and 10/14

Accrued interest on the unfunded portion of the bank debt on 10/15

1 Per annum interest Unfunded Portion × (Spread + Index Rate), or:

× 0.5% = $

2 Daily interest Per Annum Interest / Accrual Days Per Year, or:
$ / 365 days = $

3 Accrued interest on 10/15 1 day × $ =$

53
Lesson 3 Entering Credit Activity Transactions

Total accrued interest on the unfunded portion of the bank debt

1 Accrued interest between 10/01 and 10/14 $

2 Accrued interest on 10/15 $

3 Total accrued interest $

54
 Updated Through: 07/26/2017 12:21:03
tŽƌŬŝŶŐǁŝƚŚBankDebt Reporting Currency: USD

CREDIT FACILITY CONTRACT DETAIL Reporting Date: 10/15/2011

Interest Accrual
Global Funded/Unfunded Pro-Rata % Local Quantity FX Rate Book Quantity Start Date End Date Rate From Date Days Local Accrued Interest Book Accrued Interest
Topflight_Airlines_Credit_Facility (USD) 482.89
Topflight_Airlines_Credit_Fa
10.000000 1,400,000.00 1,400,000.00 191.78 191.78
cility (Unfunded)
14,000,000.00 10.000000 1,400,000.00 1.0000 1,400,000.00 07/01/2011 07/01/2041 0.5000 10/01/2011 15 191.78 191.78
Topflight Airlines Contract 3
10.000000 100,000.00 100,000.00 291.11 291.11
(USD)
1,000,000.00 10.000000 100,000.00 1.0000 100,000.00 09/30/2011 07/01/2012 6.5500 09/30/2011 16 291.11 291.11
Total Funded 100,000.00
Total UnFunded 1,400,000.00
Total Commitment 1,500,000.00

55
Entering Commitment Increases, Reductions, and Prepayments
Lesson 3 Entering Credit Activity Transactions

Exercise 26: Enter a prepayment.

Topflight Airlines is paying back $700,000 of its revolver loan.
1 In the Credit Activity Transaction screen, enter a prepayment for the XXX_Topflight_Airlines_Credit_Facility credit
facility for the GDTP portfolio, using an Event Date of 10/20/2011.
2 In the Credit Contract Activity section, note that XXX_Topflight_Airlines_Contract3 is automatically entered with
a Current Amount of 1,000,000, a New Amount of 1,000,000, and an activity value of No Activity.
In the New Amount column for Contract3, enter 300,000 and select Prepay with Interest in the Activity column.
Note that, in the Change in Amount column, Geneva automatically enters -700,000 for you.
A summary of the event:

Amount of current contract $1,000,000

Amount of prepayment ($700,000)
New amount $300,000

3 Add and close the record.

4 Run the Credit Facility Contract Detail report for the XXX_BankDebt portfolio, first with a Period End date of
10/19/2011 (the day before the prepayment), and then with a Period End date of 10/20/2011 (the date of the
rollover).
5 Compare your reports to the ones on the following pages, and then complete the information below.

Funded and unfunded portions

As of 10/19/2011 As of 10/20/2011

1 Global Contract Amount (drawdown $ $

amount)

2 Local Quantity

This represents 10% of the global contract (drawdown) amount.

3 Total commitment owned by your portfolio $ $

4 Funded portion $ $

This represents 10% of the global contract (drawdown).

5 Unfunded portion $ $

This represents the total commitment less the funded portion.

56
 Entering Commitment Increases, Reductions, and Prepayments

Accrued interest on the funded portion of the bank debt

As of 10/19/2011 As of 10/20/2011

1 Per annum interest 100,000 × 6.55% = $6,550.00 30,000 × 6.55% = $1,965.00

2 Daily interest $6,550.00/360 = $18.19 $1,965.00/360 = $5.46

3 Accrued interest between 09/30 and 10/15 Between 09/30 and 10/19: Between 09/30 and 10/20:
20 days × $ 21 days × $
=$ =$

When you select Prepay With Interest, you’re paying interest along with your prepayment. This means that on 10/20/
2011, along with the $70,000 of principal, the owner of the credit facility will receive the interest accrued on $70,000
of principal between the contract’s issue date (09/30) and the day before the prepayment (10/19). Geneva calculates
this interest automatically—you do not enter it in the prepayment transaction. If you select Prepay Delayed Interest,
this interest accrued on the prepayment amount is not recognized until the contract matures.
Reports run as of the prepayment date (10/20/2011) or later will reflect interest accrued on the reduced funded
portion.

57
58
Updated Through: 07/26/2017 12:23:24
tŽƌŬŝŶŐǁŝƚŚĂŶŬĞďƚ Reporting Currency: USD
Lesson 3 Entering Credit Activity Transactions

CREDIT FACILITY CONTRACT DETAIL Reporting Date: 10/19/2011

Interest Accrual
Global Funded/Unfunded Pro-Rata % Local Quantity FX Rate Book Quantity Start Date End Date Rate From Date Days Local Accrued Interest Book Accrued Interest
Topflight_Airlines_Credit_Facility (USD) 632.38
Topflight_Airlines_Credit_Fa
10.000000 1,400,000.00 1,400,000.00 268.49 268.49
cility (Unfunded)
14,000,000.00 10.000000 1,400,000.00 1.0000 1,400,000.00 07/01/2011 07/01/2041 0.5000 10/01/2011 19 268.49 268.49
Topflight Airlines Contract 3
10.000000 100,000.00 100,000.00 363.89 363.89
(USD)
1,000,000.00 10.000000 100,000.00 1.0000 100,000.00 09/30/2011 07/01/2012 6.5500 09/30/2011 20 363.89 363.89
Total Funded 100,000.00
Total UnFunded 1,400,000.00
Total Commitment 1,500,000.00
 Updated Through: 07/26/2017 12:23:24
tŽƌŬŝŶŐǁŝƚŚĂŶŬĞďƚ Reporting Currency: USD

CREDIT FACILITY CONTRACT DETAIL Reporting Date: 10/20/2011

Interest Accrual
Global Funded/Unfunded Pro-Rata % Local Quantity FX Rate Book Quantity Start Date End Date Rate From Date Days Local Accrued Interest Book Accrued Interest
Topflight_Airlines_Credit_Facility (USD) 403.26
Topflight_Airlines_Credit_Fa
10.000000 1,470,000.00 1,470,000.00 288.63 288.63
cility (Unfunded)
14,700,000.00 10.000000 1,470,000.00 1.0000 1,470,000.00 07/01/2011 07/01/2041 0.5000 10/01/2011 20 288.63 288.63
Topflight Airlines Contract 3
10.000000 30,000.00 30,000.00 114.63 114.63
(USD)
300,000.00 10.000000 30,000.00 1.0000 30,000.00 09/30/2011 07/01/2012 6.5500 09/30/2011 21 114.63 114.63
Total Funded 30,000.00
Total UnFunded 1,470,000.00
Total Commitment 1,500,000.00

59
Entering Commitment Increases, Reductions, and Prepayments
Lesson 3 Entering Credit Activity Transactions

Closing Credit Facility Positions

You can close a credit facility position by entering either of the following transactions.
 A Sell transaction. Typically, you use a Sell transaction if the credit facility is being sold to another investor.
 A Credit Activity “Prepayment” transaction that prepays all open contracts to zero, plus a Credit Activity “Define
Global” transaction that defines the facility amount as zero. This closes out the facility, and books any realized
gain or loss. Typically, you use these transactions when the bank debt loan has been paid in full and the credit
facility is expiring.

Summary
In this lesson, you:
 Learned about the different transactions used to record bank debt activity in Geneva.
 Defined additional credit contracts, including a “placeholder” credit contract.
 Entered rollovers.
 Entered a commitment increase.
 Entered a prepayment.
 Learned about closing credit facility positions.

60