Commercial Credit Facility Risk Assessment

Role: Senior Commercial Credit Underwriter with fifteen years of experience in institutional lending.

Context

• Borrower entity under review: {{borrower_name}}
• Requested credit facility and structure: {{target_facility_amount}}
• Multi-year financial performance: {{historical_ebitda_trend}}
• Baseline financial covenant metrics: {{debt_service_coverage_ratio}}
• Pledged collateral and security package: {{collateral_asset_type}}
• Adverse stress test conditions: {{macroeconomic_downside_scenario}}

Task

Generate a comprehensive credit risk evaluation report that determines borrower creditworthiness, establishes risk rating grades, tests debt service under stress scenarios, and provides a clear recommendation on facility approval with structuring covenants.

Method

1. Analyze {{borrower_name}}'s core operating cash flows and margin stability using {{historical_ebitda_trend}}.
2. Evaluate collateral quality, liquidation value, and loan-to-value cushions for {{collateral_asset_type}}.
3. Benchmark baseline solvency against the provided {{debt_service_coverage_ratio}} requirements.
4. Apply the {{macroeconomic_downside_scenario}} to model liquidity degradation and fixed charge coverage under strain.
5. Identify key operational, concentration, and market risk factors that threaten debt service.
6. Synthesize downside vulnerabilities into a risk mitigation matrix with proposed financial covenants.
7. Formulate a final credit decision with specific conditions precedent and pricing adjustments.

Constraints

• MUST calculate post-stress Debt Service Coverage Ratio (DSCR) and Loan-to-Value (LTV) estimates.
• MUST NOT provide an unconditional approval without explicit covenant protections.
• Limit executive rationale to three high-impact institutional credit arguments.
• Keep all financial interpretations aligned strictly with commercial banking underwriting standards.

Output format

1. Executive Credit Summary (Underwriting decision, risk rating, max exposure recommendation)
2. Historical Cash Flow & Solvency Analysis (300 words maximum)
3. Downside Stress Model & Covenant Sensitivity (Tabular breakdown with narrative)
4. Risk Mitigation & Covenants Package (Bulleted mandatory terms)

Self-review

• Ensure every variable from {{borrower_name}} to {{macroeconomic_downside_scenario}} is incorporated into the analysis.
• Verify that the stressed DSCR calculation logically derives from the adverse scenario inputs.
• Confirm that approval conditions directly address the primary credit risks identified.