SST Workshop 1 Review

Which of the following do you have to be a QIB to invest in?

• BSLs

• Junk Bonds

• Equities

• Mutual Funds

Comparatively, BSLs are ___ compared to Junk Bonds

• Higher Yielding

• More secure

• More Liquid

• More affected by changing rates (assume price is unaffected)

In a capital structure:

• The most senior lenders reside at the top of the cap stack

• Lenders are generally paid out from top to bottom

• Lenders take on more risk the higher they are on the cap stack

• HY Bonds reside at the top

Select which statements are true:

• A DCM banker advises companies on raising IG debt

• LevFin bankers have an extremely broad mandate, focusing on all types of leverage (IG, non-IG, etc.)

• An investment bank only bring a loan to market if it agrees to underwrite it fully

• When an investment bank underwrites a loan but can't get it off their balance sheet it is called a suspended bridge

Select which of the following statements are true:

• CLO managers use the proceeds from a SPV to acquire a portfolio of leveraged loans which is then used as collateral to raise money from largely IG debt ; the proceeds of the IG debt are then promptly used to repay the SPV

• CLO managers are trusted to manage a portfolio of loans based solely on their investing acumen

• CLOs are the largest holders of leveraged loans, holding ~70% of all leveraged loans

• The CLO manager uses their own equity infusion to pay interest on the debt which they raised

10% coupon @ 80c maturing in 2yrs: YTM?

• 10%

• 22%

• 12.5%

• 16.5%

Why does PIK add cash to our balance sheet? Choose the most accurate answer.

• It doesn't

• We add it back in CFO because it is non-cash

• It causes a cash tax shield

• It accrues to debt so cash increases to make the balance sheet balance

Which is the highest for a bond trading at a discount: coupon, current yield, YTM, YTW, YTC

• coupon

• current yield

• YTM

• YTW

• YTC

You have a $500mm revolver, $100mm drawn. You have a $400mm TL trading at 75c. You have $600mm unsecured notes trading at 50c. Your EV is $700mm at a 7x multiple. What is market leverage at the unsecured notes?

• 8x

• 15x

• 10x

• None of these

A company has 50mm EBITDA and is valued at 12x. The capital structure consists of a 200mm

1L TL, 600 unsecured notes, 50mm undrawn revolver, and 20mm cash. What is recovery to unsecured notes?

• 25c

• 33c

• 66c

• 75c