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.

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.