Lending, covenants, recoveries and the private credit market.
In distress, a claim is worth what its documents let it argue for, not where it sits on the slide.
Restructuring and distressed interviews, credit modelling, and any discussion of covenant-lite lending.
From The Caesars Palace Coup · Max Frumes and Sujeet Indap
Ask what a rating assumes about defaults happening together before trusting what it says about the pool.
Any question about 2008, about structured credit, or about why a highly rated instrument lost most of its value.
From The Big Short · 2015
Ask when the debt comes due, what it can reach, and what trips it, before asking how much there is.
Real estate, infrastructure and any capital structure question where leverage is measured only as a ratio.
From Brookfield Asset Management's 2008 letter to shareholders · Bruce Flatt
The right amount of debt minimises the blended cost of capital; the maximum a lender will provide is a different and larger number.
LBO and leveraged finance questions on how much debt a deal can carry, and corporate finance questions on capital structure.
From Session 18: Optimum Capital Structure — The Cost of Capital Approach · Aswath Damodaran (NYU Stern)
A prepayable bond gets shorter when rates fall and longer when they rise; the spread you are paid is for that asymmetry.
Fixed income, securitised products and mortgage finance interviews, and any question about why mortgage rates move with MBS rather than the policy rate.
From Mortgage-Backed Securities · Andreas Fuster, David O. Lucca and James Vickery, Federal Reserve Bank of New York (Staff Reports)
Private credit's borrowers are more levered and its recoveries lower than the syndicated market's, and the capital waiting to be deployed is what pressures underwriting.
Credit fund, leveraged finance and private equity interviews, and any discussion of where the risks in private credit sit.
From Private Credit: Characteristics and Risks · Fang Cai and Sharjil Haque, Board of Governors of the Federal Reserve System (FEDS Notes)
Seniority is a queue for losses; the thickness of the slices beneath you is your protection.
Any structured credit, securitisation or capital structure question, in an interview or on the desk.
From The Big Short · 2015