Investment Banking interview preparation
Every question below is either traced to a named firm from a public candidate report, or tagged at desk level when we could not trace it. Answers are written the way you would actually say them out loud — answer first, then the mechanism, then the limitation.
100 questions, mapped to the firms that asked them
- Questions
- 100
- Traced to a firm
- 100
- Firms
- 46
- Updated
- September 2026
063Given this capital structure, what is the recovery on each claim?Houlihan LokeyRestructuring · New York · 2026
Say this
Value the enterprise first, then pay it out down the waterfall in strict seniority until it runs out. Whichever tranche the value runs out in is the fulcrum security, and that is where the equity ends up after the restructuring.
Then walk it
- Establish enterprise value. In distress I would use a distressed multiple on normalised EBITDA and cross-check against a liquidation value, because the two set a range.
- Then the waterfall: super-priority and DIP financing first, then secured claims in order of lien priority, then unsecured bonds, then subordinated debt, then preferred, then common.
- Work down until the value is exhausted. Say enterprise value is $600, the revolver and term loan total $400 and recover in full, and the unsecured bonds are $400. They receive the remaining $200, so a 50 percent recovery.
- Those bonds are the fulcrum. They are the class that gets converted into the new equity, which is why distressed funds buy the fulcrum, not the safest paper.
- Everything below the fulcrum, subordinated debt and common equity, recovers nothing in a strict waterfall. In practice they often receive a small stub or warrants to buy consent and avoid a contested plan, which is a negotiation outcome rather than an entitlement.
Where candidates lose it
Jumping to the waterfall before establishing enterprise value. You cannot allocate what you have not measured. And missing the fulcrum concept entirely, which is the single most important idea in the discipline.
Expect next
- Which security would you buy?
- What is the absolute priority rule and when is it violated?
- What section of the indenture deals with payment waterfalls?
Reported by candidates at Houlihan Lokey (Restructuring, New York, 2026). 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.