Debt Capital Markets interview preparation

Questions

100

Traced to a firm

45

Firms

26

Updated

September 2026

Asked at

All firmsTSTruist Securities5PIMCO4TD Securities4Apollo Global Management3Nomura3Scotiabank3Bain Capital2Houlihan Lokey2Mizuho2Neuberger Berman2Oaktree Capital Management2RCRBC Capital Markets2Carlyle Group1Deutsche Bank1Golub Capital1HPS Investment Partners1Invesco1KKR1Lazard1Moelis & Company1Moody's1Northern Trust1NUNuveen1Rothschild & Co1S&P Global1Wells Fargo Securities1

Topic

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

Level

AnyCoreIntermediateHard

Type

AnyTechnicalBrainteaserMarket viewCaseFit

1. 082What is the difference between a tender offer, an exchange offer and a consent solicitation?Liability managementHardtechnicalRestructuringLeveraged finance

   Say this

   A tender buys bonds back for cash. An exchange swaps old bonds for new ones, usually with a longer maturity. A consent solicitation buys a change to the indenture terms without changing the bonds themselves. All three are voluntary, and all three depend on how much of the class you can persuade.

   Then walk it

   1. Tender: the issuer offers cash, either at a fixed price, at a fixed spread over a benchmark, or through a modified Dutch auction where holders name their price and the issuer fills up to a cap. Used to retire a maturity early, to buy back debt trading at a discount, or to clean up an old high-coupon line.
   2. Exchange: swap into new paper. A par-for-par exchange that extends maturity is the classic amend-and-extend in bond form. A discount exchange — new bonds with lower face value — is a distressed exchange, and agencies will typically treat it as a default even though it is consensual.
   3. Consent solicitation: pay holders a small consent fee to amend the indenture. Covenant changes usually need a simple majority; changing the money terms — principal, coupon, maturity — normally needs 90 percent or unanimity. That distinction is what limits how far you can push it.
   4. Exit consents are the aggressive version and worth naming: combine an exchange with a consent that strips covenants from the old bonds, so anyone who does not participate is left holding worse paper. It is coercive by design and it has been litigated repeatedly.
   5. Why an issuer prefers these to a call: for investment grade paper the make-whole makes calling uneconomic, so a tender at a negotiated price is cheaper. For distressed paper, an exchange preserves cash the company does not have.
   6. The honest caveat: none of these bind non-participants on the money terms. A holdout keeps its original bond, and a small aggressive holdout can block a deal or extract a better price, which is why liability management is as much negotiation as structuring.

   Where candidates lose it

   Merging exchange offers and consent solicitations. One changes the instrument, the other changes the terms of the existing instrument, and they need different consent thresholds. Also, saying a discount exchange is treated as a default by the agencies is the detail that shows you know the real-world consequence.

   Expect next

   • What is an exit consent and why is it controversial?
   • What threshold do you need to change the coupon?
   • Why not just call the bonds?
2. 083What is a liability management exercise, and explain a drop-down and an uptier.Liability managementHardsuperdayRestructuringPrivate credit

   Say this

   A liability management exercise is an out-of-court transaction that uses permissive document capacity to raise new money or cut debt, usually at some existing lenders' expense. A drop-down moves collateral into an unrestricted subsidiary and borrows against it; an uptier uses a majority vote to subordinate the non-participating minority.

   Then walk it

   1. Why they happen: a covenant-lite borrower running out of cash with no maintenance default to force a restructuring, plus documents with wide investment, debt and lien baskets. There is capacity and there is a need, so the transaction happens.
   2. Drop-down, sometimes called the J.Crew or trapdoor: use investment and restricted payment capacity to transfer valuable assets — IP, a brand, a business — to an unrestricted subsidiary outside the credit group, then raise new secured debt against those assets. Existing lenders keep their lien on what is left, which is now worth much less.
   3. Uptier, sometimes called the Serta: get a majority of lenders to amend the credit agreement to permit new super-priority debt, then let only that participating majority roll into the new senior tranche at a discount. The minority is left structurally behind, with the same face value and a much worse claim.
   4. Why the majority can do it: most credit agreements allow amendments with 50.1 percent consent for everything except a small list of sacred rights — principal, interest, maturity, pro rata sharing. Priority and lien release often sit outside that list, which is the whole vulnerability.
   5. The consequences you should name: extensive litigation, with courts reaching mixed results on whether these transactions breach the implied covenant of good faith; and a wave of document tightening, with J.Crew blockers, Serta protections and pro rata sharing provisions now standard asks from lenders.
   6. And the lender behaviour it caused: co-operation agreements, where a group of lenders contractually commits not to participate in any such transaction without the others, so no majority can be assembled against them. That is now a standard defensive tool.

   Where candidates lose it

   Describing these as fraud or as a breach. In most cases they were permitted by the document, and that is precisely the point. The sophisticated answer names the amendment threshold that allows it and the blockers lenders now demand in response.

   Expect next

   • How does a J.Crew blocker work?
   • What is a co-operation agreement?
   • Would you buy the paper of a borrower with an aggressive document at a discount?

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.