Credit and restructuring modelling asks what a sponsor’s model does not: how much can be lent against a business, whether it still pays when the plan misses, how much room the covenants leave, how many weeks of cash it has when it does not, and what each creditor recovers if it fails. Three workbooks cover that arc in order: the lender’s credit model that sizes and monitors the debt, the 13-week cash flow a stressed borrower lives by, and the recovery waterfall that divides the company when it is restructured. The leveraged buyout that usually creates the debt sits with the M&A and private equity models.
By Surojit Chakraverti, founder of L3VLUP and an investor running a long-short healthcare and technology equities strategy.
On this subject: credit and restructuring.Updated 1 October 2026
Size a leveraged loan from three tests and name the one that binds, run the borrower through a downside, read covenant headroom as an EBITDA cushion, and say what must be refinanced and what the lenders recover in default.
Forecast a stressed company’s liquidity week by week, size the revolver inside its borrowing base, and say in which week the covenant breaks and how much new money would keep it whole.
Distribute a restructured company’s value by an assumed priority ranking across a range of enterprise values, identify the fulcrum security in each, and calculate the return on each traded class at an assumed purchase price.
Other areas: Core modelling · M&A and private equity · Real estate · Infrastructure and project finance · Healthcare · Technology · All 19 models
Read the credit and covenant guide first, then size a structure in the capital stack lab. Open the credit model and switch it to the downside case to see which covenant breaks first. The 13-week model shows the same company weekly once cash is short, and the recovery waterfall shows who owns it afterwards. Each model has a starter workbook that leaves one schedule for you to build.
Each schedule is one reusable calculation, explained on its own page with the rows it occupies in every model that uses it.
Financing schedules
Debt capacity
How much a borrower can borrow, and which test binds
Financing schedules
Debt schedule
Tranches, interest, amortisation and the sweep
Financing schedules
Covenant compliance and headroom
Leverage, interest cover, fixed charge cover, EBITDA cushion
Financing schedules
Maturity profile and refinancing
What falls due when, and whether it can be refinanced
Restructuring schedules
Absolute priority distribution
Value paid out by seniority, collateral first
Restructuring schedules
Cash receipts and the collections curve
Sales to cash, week by week
Restructuring schedules
Cash disbursements by calendar
What is paid, and on which Friday
Restructuring schedules
Borrowing base and availability
What the revolver will actually lend this week
Restructuring schedules
Liquidity forecast and covenant headroom
Cash, availability, headroom, shortfall
Restructuring schedules
Claims by class
The claims register a recovery is built on
Restructuring schedules
Fulcrum analysis and implied returns
Which class is the fulcrum, and what it returns
Covenant Headroom · 10 min
Compute the three maintenance ratios from a certificate, find the binding test and its EBITDA cushion, and say whether a given downside breaches.
Capital Stack Challenge · 15 min
Finance a real buyout from revolver to equity, hold it through a shock, and explain every layer against the deal the sponsor actually did.
Optimal Capital Structure · 15 min
Explain why more debt stops helping: watch coverage, rating and spread move as leverage rises until WACC turns.
LBO Modelling Test · 60 min
Sit the one-hour test under a clock, in the browser or in your own workbook, and get every line of the build marked.
Advise on M&A and capital raising. The training ground the rest of the map feeds off.
How to get in and preparePrice and place bonds and loans. Closest thing in banking to a markets seat with banking hours.
The same tools pointed at companies in distress. Countercyclical, and technically the hardest advisory seat.
Lend to the same companies PE buys. Downside-focused: you get paid back or you do not.
Debt of companies in trouble. Legal structure matters as much as the financials.
Buy control of established companies using debt, improve them, sell them.
How to get in and prepareThey describe the same transaction from opposite sides. The LBO model is built for the sponsor and ends in an equity return; it sits with the M&A and private equity models. The credit model is built for the lender and ends in debt capacity, covenant headroom, a refinancing test and a recovery. They share the debt schedule, which is why reading one beside the other is worth the time.
With liquidity, not value. The 13-week cash flow says how long the company can run and how much new money it needs; that sizes the DIP facility. The recovery waterfall then distributes the restructured company’s value among the creditors and names the fulcrum security, the class that will own it.
Leveraged finance and credit interviews test debt capacity, covenants and the debt schedule; restructuring interviews test the recovery waterfall, the fulcrum and liquidity. The restructuring interview guide works through the questions, and each model page lists the mistakes a reviewer looks for.