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. 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.