Debt Capital Markets interview preparation

Questions

100

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45

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26

Updated

September 2026

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Topic

All topicsBond mechanics11Duration and convexity6Yield curve and rates5Credit spreads5Credit analysis and ratings13Credit modelling9Primary issuance9Syndication and loans10Structured credit7Covenants and documentation5Liability management5Indian debt markets7Fit8

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1. 034What credit metrics would you look at when analysing a company like Nike?Credit analysis and ratingsIntermediatetechnicalTSTruist SecuritiesLeveraged Finance · Atlanta · 2024

   Say this

   For a high-grade consumer brand like Nike the leverage question is almost trivial — it runs around one turn of net leverage and coverage in the teens — so the interesting metrics are the working capital and brand ones. Inventory days, gross margin, and the direct-to-consumer mix tell you far more about the credit than net debt to EBITDA does.

   Then walk it

   1. Start with the standard set anyway: net debt to EBITDA, EBITDA to interest, free cash flow to debt, and the maturity profile. For a single-A rated consumer company you expect leverage around 1 to 2 times and coverage well above 10, so none of these bind.
   2. Then adjust for what the statements hide: operating leases on retail stores are the big one, and for an apparel company they can add a full turn. Post-IFRS 16 they are on balance sheet, but the agencies still adjust further.
   3. Working capital is the real credit story. Inventory days is the single most informative number for a footwear and apparel business, because excess inventory forces discounting, which hits gross margin, which hits EBITDA and cash simultaneously. Nike's 2022 to 2023 inventory build is exactly that story.
   4. Gross margin is the read on brand strength and pricing power. A branded consumer credit is only investment grade because the brand lets it hold price. If gross margin is compressing while inventory rises, the brand thesis is weakening whatever leverage says.
   5. Then the structural items: channel mix between wholesale and direct, customer concentration among big wholesale accounts, FX exposure for a global business, and the buyback and dividend policy, because a company like this returns more cash than it needs to and that is a financial policy risk rather than an operating one.
   6. And what would actually break it: not leverage, but a multi-year brand decline. So I would monitor market share, inventory, and gross margin far ahead of the credit ratios.

   Where candidates lose it

   Reeling off leverage and coverage for a company where those metrics are irrelevant. The skill being tested is choosing metrics that fit the business. For a branded consumer company, inventory days and gross margin are the credit metrics, and saying so is the whole answer.

   Expect next

   • What would worry you first about that credit?
   • How do you adjust for store leases?
   • Would your metrics change for a supplier to Nike instead?

   Reported by candidates at Truist Securities (Leveraged Finance, Atlanta, 2024). Source: Wall Street Oasis.

Firm tags come from public, anonymous candidate reports on Wall Street Oasis: strong signal, not sworn testimony. Firms are named as the places a question was reported, not as partners of Fin Maverick. Answers are written for this page to show how to think out loud; they are not scripts to recite.