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
059Why would a sponsor prefer to take on high yield debt to finance an LBO rather than bank debt?LazardGeneralist · Amsterdam · 2025
Say this
Flexibility. High yield bonds are typically fixed rate, bullet maturity, with no maintenance covenants and no mandatory amortisation. You pay more in coupon to buy freedom and certainty of cash flow.
Then walk it
- No amortisation. Bank term loans grind down cash with mandatory repayments and a cash sweep; bonds are bullet, so all the cash stays in the business for growth or bolt-ons.
- Covenant-light. Bonds carry incurrence covenants that only bite when you do something, rather than maintenance covenants tested every quarter. A sponsor running a turnaround does not want a quarterly leverage test.
- Fixed rate. Bonds lock the coupon, so a rising rate environment does not eat the equity. Floating-rate term loans expose the deal to rate risk unless hedged.
- Longer tenor, usually seven to ten years against five to seven for a term loan, so no refinancing wall mid-hold.
- The costs, which you should name: a higher coupon, call protection that makes early repayment expensive, and a public disclosure burden. So the real answer is that sponsors use both, bank debt for the cheap senior layer and bonds for the flexible layer, and the mix depends on whether the thesis needs cash flexibility or the lowest possible cost.
Where candidates lose it
Answering 'because banks will not lend that much'. Sometimes true, but it misses the point. The trade is cost against flexibility, and naming covenant structure and bullet maturity is what shows leveraged finance literacy.
Expect next
- What is the difference between incurrence and maintenance covenants?
- Describe the differences between private credit and bank syndicated debt.
- What is call protection?
Reported by candidates at Lazard (Generalist, Amsterdam, 2025). 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.