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. 081A client has a 500 million bond maturing in 18 months. How do you advise them?Liability managementIntermediatetechnicalCorporate bankingLeveraged finance

   Say this

   Refinance early rather than late, and decide between a straight new issue, a tender and refinance, or a partial repayment from cash. Eighteen months is the point at which the maturity starts affecting the rating outlook and the auditor's going-concern language, so the advice is to move in the next two quarters and not to optimise the last five basis points.

   Then walk it

   1. Start with the constraint calendar, not the market. Ratings agencies begin treating a maturity as a liquidity risk inside 12 to 18 months. Auditors look at 12 months for going concern. A revolver may have a springing maturity or a clean-down requirement tied to it. Those dates set the deadline, not your view on rates.
   2. Then the options. One: issue a new bond now and hold the proceeds, accepting negative carry for a few months in exchange for certainty. Two: tender for the existing bond and issue simultaneously, which removes the maturity and lets investors roll. Three: repay from cash or the revolver if the balance sheet allows, which is often the cheapest answer nobody suggests.
   3. The tender-and-new-issue combination is usually the cleanest for a bond trading near par. You announce the new deal and the tender together, existing holders roll into the new paper, and the old line disappears. If the bond trades at a discount, buying it back in the open market or at a discount tender also books a gain.
   4. Then structure the new deal: tenor to avoid clustering maturities, currency to match cash flows or to access better demand, and fixed versus floating. I would also look at extending the maturity profile generally rather than replacing 18 months with another cliff.
   5. Talk about the cost honestly with the client: carrying pre-funded cash for six months at a negative spread of 100 basis points on 500 million is about 2.5 million. That is the price of insurance, and against a forced refinancing it is cheap.
   6. And say what would change the advice: if the credit is deteriorating, move immediately and accept the price, because the option value of waiting is negative when your own rating is the variable.

   Where candidates lose it

   Answering only 'issue a new bond'. The advice question is about timing and the constraint calendar — rating agency treatment, going concern, springing revolver maturities — plus the tender option and the possibility of just paying it off. And do not advise waiting for a better market with a wall approaching.

   Expect next

   • What if the bond trades at 85?
   • How much negative carry would you accept?
   • What if the credit is deteriorating at the same time?
2. 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?
3. 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?
4. 084What were the most important recent developments in the debt markets?Liability managementIntermediateevery roundRothschild & CoRestructuring · London · 2025

   Say this

   Pick three themes and attach a number to each rather than listing headlines. The ones that have actually reshaped the market: private credit taking share from syndicated lending, the maturity wall from 2021-vintage deals being refinanced at much higher coupons, and the normalisation of liability management exercises as the default path instead of Chapter 11.

   Then walk it

   1. Private credit: growth to well over a trillion dollars of assets, now competing for multi-billion dollar financings, with banks partnering as much as competing. The interesting second-order effect is that less collateral reaches the broadly syndicated loan market, which squeezes CLO formation.
   2. The refinancing wall: companies that borrowed at very low spreads in 2020 and 2021 have been refinancing at coupons several hundred basis points higher. Interest coverage has compressed sharply at the weaker end of the leveraged universe even where spreads look tight, which is why default rates rose while spreads did not widen much.
   3. Liability management as the default: drop-downs, uptiers and double-dip structures have moved from exotic to routine, so restructuring increasingly happens out of court through document capacity. Recovery outcomes have become more dispersed and first lien recoveries have fallen well below the historic 70 percent norm.
   4. Then whichever is live when you interview: the tone of central bank policy and what the curve is pricing, any repricing of credit spreads against historically tight levels, the growth of the private asset-backed and significant risk transfer market, and issuance volumes versus last year.
   5. Then take a view rather than just describing. Something like: I think the credit cycle is being expressed in recovery severity rather than default frequency, which is unusual, and it means documentation analysis matters more than macro.
   6. The discipline: check your numbers the morning of the interview, and never quote a figure you cannot source. A confidently wrong spread level is worse than saying roughly where things sit.

   Where candidates lose it

   Reciting headlines with no numbers and no consequence for the desk. Pick three themes, one number each, and one implication. And tailor the lead to the seat — a restructuring interviewer wants the liability management story, not a summary of Fed policy.

   Expect next

   • Why have recoveries fallen if default rates are manageable?
   • Is the private credit market a risk to the system?
   • Where are high yield spreads versus their long-run average?

   Reported by candidates at Rothschild & Co (Restructuring, London, 2025). Source: Wall Street Oasis.

5. 085What would you think if a company like Google began paying dividends?Liability managementIntermediatetechnicalS&P GlobalDebt Capital Markets · Chicago · 2022

   Say this

   I would read it as a signal that management sees fewer high-return reinvestment opportunities relative to its cash generation, and that the business has moved from growth to maturity. For a credit analyst it is mildly negative — cash is leaving — but for a company with that much net cash it is almost irrelevant to the credit.

   Then walk it

   1. The signalling content is the substance of the answer. Initiating a dividend is a commitment: firms are extremely reluctant to cut them, so it says management is confident about the durability of cash flow and has run out of projects clearing its hurdle rate.
   2. For a credit analyst the framework is capital allocation priority: reinvestment, dividends, buybacks, debt reduction. A dividend ranks ahead of debt reduction in practice because it is sticky, so it slightly reduces the cushion available to lenders.
   3. But scale decides it. A company with a large net cash position and coverage in the dozens is not credit-impaired by a dividend. Where it would matter is a leveraged issuer initiating a dividend while carrying 5 turns of debt — there the restricted payment covenant exists precisely to stop it.
   4. The thing to add that makes the answer feel current: Alphabet did initiate a dividend and a large buyback in 2024, and the market read it exactly as a maturity signal alongside continued heavy capital spending on AI infrastructure. So the interesting version of the question is why a company would return cash and raise capex at the same time.
   5. The credit angle on that combination: heavy capex plus shareholder returns funded partly from debt is how a net-cash technology company becomes a leveraged one over a decade. That trajectory, not the dividend itself, is what a ratings analyst tracks.
   6. And the limitation: a dividend initiation is one data point. Financial policy is a trajectory, so I would look at the stated payout target and the behaviour over the next three years before changing a view.

   Where candidates lose it

   Answering purely from an equity perspective. The interview was for a debt and ratings seat, so bring it back to capital allocation priority, the stickiness of dividends versus buybacks, and why the restricted payment covenant exists. Being able to say Alphabet actually did this, and when, is what makes it current.

   Expect next

   • Which is better for a lender, a dividend or a buyback?
   • How would you treat this in a rating outlook?
   • What if a 5-times levered company did the same?

   Reported by candidates at S&P Global (Debt Capital Markets, Chicago, 2022). Source: Wall Street Oasis.

6. 086Why is India's corporate bond market so shallow relative to its equity market?Indian debt marketsHardsuperdayIndian debt capital marketsCredit research

   Say this

   Because almost all the demand sits with a few institutions that only buy the top of the rating scale, and almost all the supply is private placements by AAA and AA financial issuers. The outstanding stock is roughly 50 to 55 lakh crore rupees, a bit under 20 percent of GDP, against well over 100 percent in the US — and the gap is a demand problem more than a supply one.

   Then walk it

   1. The demand side is the binding constraint. Insurance companies, provident and pension funds dominate, and their investment regulations push them heavily into sovereign and AA-plus or better paper. Below AA there is almost no natural buyer, so the market has a cliff rather than a curve.
   2. Banks fill that gap with loans instead. A mid-rated corporate in India borrows from a bank, not from the bond market, because the bank will take the credit risk that no bond investor will. So bank credit crowds out the lower-rated bond market.
   3. Supply is concentrated too. The large majority of issuance is private placement rather than public issues, and financial sector issuers — NBFCs, housing finance companies, banks — account for a very large share. Genuine non-financial corporate issuance is a minority of the market.
   4. Secondary liquidity is the self-reinforcing part. Buy-and-hold institutions do not trade, so turnover is thin, so new investors price in illiquidity, so fewer participate. Trading is concentrated in a handful of recent AAA lines and everything else is effectively untraded.
   5. What has actually helped: the SEBI electronic bidding platform bringing price discovery to private placements, mandatory bond financing for large borrowers, the corporate bond repo and the Bharat Bond ETFs, RBI's backstop facility for debt funds after the 2020 Franklin Templeton episode, and rising foreign participation through the index inclusion of G-secs, which frees domestic capacity.
   6. The honest diagnosis: you cannot fix this with issuer-side reform alone. Until there is a large investor base willing and permitted to take A and BBB credit risk — insurance limits, pension rules, a credit fund industry — the market stays a AAA financing venue. That is the single point worth making.

   Where candidates lose it

   Blaming it on lack of issuer awareness or on regulation generally. The specific answer is the absence of a buyer base below AA, because institutional mandates prohibit it, and the resulting crowding out by bank lending. Have one size figure for the market and a rough percentage of GDP.

   Expect next

   • What would actually fix it?
   • Why do NBFCs dominate issuance?
   • What did the Franklin Templeton episode change?
7. 087What is an NCD, and how does a public NCD issue work in India?Indian debt marketsCoretechnicalIndian debt capital marketsCorporate banking

   Say this

   An NCD is a non-convertible debenture — a plain corporate bond under Indian law, so called to distinguish it from convertible debentures. It can be secured or unsecured, and it is issued either by private placement to institutions, which is most of the market, or by a public issue to retail investors under SEBI's debt listing regulations.

   Then walk it

   1. The private placement route is the market: a company with a board and shareholder authorisation issues to up to 200 identified investors per financial year per class, executes a debenture trust deed, and now must bid it on the electronic bidding platform above a size threshold. Listing on NSE or BSE follows, and settlement is through the depositories.
   2. The public issue route is what retail investors see. It needs a SEBI-filed prospectus, a credit rating, a debenture trustee, a minimum subscription, a fixed subscription window of a few days, and allocation across reserved categories — institutional, non-institutional, high net worth individual and retail.
   3. Who uses public issues: mainly NBFCs and housing finance companies, because they need retail funding and can offer coupons a few hundred basis points above bank deposits. Retail NCD issues from names like the large gold loan and vehicle finance NBFCs are a regular feature of the market.
   4. Secured versus unsecured matters here more than in a developed market. A secured NCD carries a charge over specific assets or a floating charge on receivables, with security cover — commonly 1 to 1.25 times — maintained through the life and certified periodically. Unsecured NCDs, especially subordinated ones that count as Tier II capital for an NBFC, are a different credit entirely.
   5. The trustee has real teeth post-2020 reforms: SEBI strengthened debenture trustee obligations on security creation, monitoring and enforcement after several defaults where security turned out to be incomplete.
   6. The risk to say honestly: a retail investor buying a 10 or 11 percent NCD from an NBFC is taking genuine credit risk at a rating that may be AA or lower, and the IL&FS and DHFL defaults showed what that means. High coupon in the Indian retail market is a credit signal, not a bargain.

   Where candidates lose it

   Treating an NCD as an exotic instrument. It is just a corporate bond, and the useful content is the private placement versus public issue distinction, the security cover mechanic and the trustee's role. Naming the NBFC defaults shows you understand why the retail investor protections were tightened.

   Expect next

   • Why do NBFCs dominate the retail NCD market?
   • What is security cover and who certifies it?
   • How is NCD interest taxed for a retail investor?
8. 088Walk me through the Indian government securities curve. Who issues, who buys, and what drives it?Indian debt marketsIntermediatetechnicalIndian debt capital marketsFixed income asset management

   Say this

   The RBI issues G-secs on behalf of the central government through weekly auctions, running from 91-day treasury bills out to 40 years. Banks, insurers and provident funds are the dominant buyers, largely because they are required to be. The curve is driven by the RBI's policy rate, the government's borrowing calendar, and since 2024 by foreign flows through global bond index inclusion.

   Then walk it

   1. Supply mechanics: a half-yearly borrowing calendar, weekly auctions conducted on the RBI's electronic platform, with primary dealers obliged to bid and to underwrite. State governments issue separately as state development loans, which trade at a spread of typically 30 to 70 basis points over the comparable central G-sec.
   2. Demand is structurally captive. Banks must hold a statutory liquidity ratio of government securities, insurers and provident funds have prescribed minimum allocations, and that mandated demand is why India can fund a large deficit at moderate yields with a shallow corporate market.
   3. The 10-year benchmark is the reference point for everything else. Corporate bonds are quoted as a spread over the comparable G-sec, so the curve is the pricing backbone of the whole debt market, just as Treasuries are in the US.
   4. Drivers: the repo rate and the RBI's stance, inflation prints and the monetary policy committee's 4 percent target with a 2 to 6 percent band, the fiscal deficit and the gross borrowing number in the Budget, banking system liquidity, and crude oil, because India imports most of its energy and that feeds both inflation and the current account.
   5. The 2024 change worth knowing: inclusion of Indian G-secs in JP Morgan's emerging market bond index, and subsequently others, brought substantial passive foreign inflows for the first time. That has compressed yields, lengthened the buyer base, and also introduced a new source of volatility from global flows.
   6. The honest caveat: because so much demand is mandated, the curve is not a pure market signal about growth or inflation in the way the US curve is. Regulatory allocation and RBI liquidity operations can move it independently of fundamentals.

   Where candidates lose it

   Describing it like the Treasury market. The distinctive Indian features are the captive regulatory demand through SLR and insurance mandates, the state development loan spread, and the 2024 index inclusion. Without those the answer is generic and could be about any sovereign.

   Expect next

   • What did index inclusion change?
   • Why do SDLs trade wide of central G-secs?
   • How does the SLR requirement affect bank behaviour?
9. 089How do CRISIL, ICRA and CARE ratings compare to Moody's and S&P, and why can't you compare them directly?Indian debt marketsIntermediatetechnicalIndian debt capital marketsRating agencies

   Say this

   The Indian agencies rate on a national scale, which is calibrated within India and effectively anchored to the sovereign. So an Indian AAA is the best credit in India, not the equivalent of a global AAA — the sovereign itself is around BBB minus on the global scale, so a domestic AAA maps to somewhere around BBB globally.

   Then walk it

   1. The main agencies: CRISIL, majority owned by S&P; ICRA, majority owned by Moody's; CARE, independent; India Ratings, owned by Fitch; plus Brickwork, Acuite and Infomerics. All are SEBI-registered credit rating agencies, and RBI separately accredits agencies for bank capital purposes.
   2. The national scale is the key concept. It ranks credits relative to each other within one country, with the top of the scale pinned to the strongest domestic credits. It says nothing about cross-border comparability, which is why a company rated AAA domestically may be unrated or low investment grade internationally.
   3. So the comparison rule: use the global scale rating if you need to compare across countries, and remember the sovereign ceiling — very few corporates are rated above their sovereign, and those that are have genuinely offshore cash flows.
   4. The credibility issues to acknowledge honestly: IL&FS was rated AAA shortly before defaulting in 2018, and DHFL similarly. SEBI responded with disclosure of rating rationales and sharp rating actions, standardised probability of default benchmarks, mandatory disclosure of rating transition and default rates, and rules on rating withdrawal and issuer non-cooperation.
   5. Practical reading discipline: check whether a rating is on watch or has a negative outlook, look at the rating history rather than the point-in-time letter, look for the issuer-not-cooperating flag, and read the rationale for what the agency says about liquidity, because in India liquidity is what kills issuers rather than leverage.
   6. The genuinely useful part: because bank loan ratings are mandatory, India has rating coverage of tens of thousands of entities, most of them small and private. That is a data asset with no real parallel elsewhere.

   Where candidates lose it

   Treating an Indian AAA as a global AAA. That is the single error this question exists to catch. Name the national scale, the sovereign anchor, and then the IL&FS episode, because an interviewer will otherwise ask whether you trust the ratings at all.

   Expect next

   • What went wrong with IL&FS?
   • What does issuer-not-cooperating mean?
   • Why does India have so many rated entities?
10. 090What is SEBI's electronic bidding platform, and what problem does it solve?Indian debt marketsHardtechnicalIndian debt capital marketsSyndicate desks

    Say this

    The EBP is an exchange-run electronic platform on which private placements of debt above a size threshold must be bid and allotted. It solved a transparency problem: private placements were previously negotiated bilaterally with no visible price discovery, so investors could not tell whether they were being fairly priced.

    Then walk it

    1. Mechanics: the issuer puts up a bid notice with the terms — size, tenor, coupon or spread, rating, security — a day or two ahead. Investors bid within a defined time window. Allotment follows a stated method, either uniform yield or multiple yield, and the results are published.
    2. The threshold has been progressively lowered by SEBI, so a large and growing share of private placements now goes through it rather than being done over the phone. Issues below the threshold, and certain categories, remain outside.
    3. What it fixed: before EBP, an NBFC could place paper with one institution at one yield and identical paper with another at 40 basis points different, and nobody would know. That opacity depressed participation, because an investor who cannot verify the price assumes they are the one being mispriced.
    4. Second benefit: it created a data trail. Published bid results give the market a series of primary levels for credits that otherwise never trade, which partially substitutes for the missing secondary market.
    5. The honest limits: EBP improves primary price discovery, it does not create secondary liquidity, and the underlying demand problem below AA is untouched. Issuers have also at times structured around the thresholds, and anchor investor arrangements can still effectively pre-determine an outcome.
    6. Where it fits in the reform set worth naming alongside it: the request-for-quote platform for secondary trades, corporate bond repo, the large-corporate mandatory bond financing framework, and the Bharat Bond ETFs. Together they are an attempt to build a market, and EBP is the piece that worked most clearly.

    Where candidates lose it

    Confusing EBP with a secondary trading venue. It is a primary issuance platform, and the separate RFQ platform handles secondary. Also, be honest that it fixed price discovery and not liquidity, because overclaiming on Indian market reform is easy to catch out.

    Expect next

    • What is the RFQ platform?
    • Does EBP improve secondary liquidity?
    • What is the large corporate borrowing framework?

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.