90mins IG bond case study questions / credit pitch

For your upcoming IG bond case study, here's a breakdown of how to prepare effectively based on the most helpful WSO content:

1. Accessing Materials for IG Primary Issuances

• Key Documents: You’re correct that materials like the 10-K, 10-Q, rating agency reports, and CIMs are essential. For primary bond issuances, you can also look for:

  • Offering Memorandums: These are often available through the issuer's filings or investor relations website.
  • Term Sheets: These are typically included in the bond prospectus or can be found in SEC filings (e.g., 8-Ks or prospectuses filed under the Securities Act).
  • Rating Agency Reports: Check Moody’s, S&P, or Fitch for issuer ratings and commentary.
  • Bloomberg Terminal: If you have access, Bloomberg is a goldmine for bond issuance data, including term sheets and covenant details.
  • Public Filings: Use EDGAR (SEC’s database) to search for recent bond issuances by the issuer.

• Practice Access: For practice, you can look at recent bond issuances from companies in the same sector. Search for their filings on EDGAR or use free resources like company investor relations pages.

2. Term Sheet Summary & Public Sources

• Term Sheet Availability: Term sheets are often included in the bond prospectus or as part of the 8-K filings. You can also find summaries in rating agency reports or Bloomberg.
• Key Covenants: Focus on:
  • Negative Covenants: Restrictions on additional debt, asset sales, or dividends.
  • Financial Maintenance Covenants: These are less common in IG bonds but may include leverage or interest coverage ratios.
  • Change of Control Provisions: Important for understanding downside risk.
  • Call Provisions: Check for make-whole calls or step-ups in coupon rates.

3. Efficient Reading Strategy for Primary Issuance Materials

• Prioritize Key Sections:
  1. Executive Summary/Term Sheet: Start here for a high-level overview of the deal.
  2. Covenants Section: Focus on restrictions and financial terms.
  3. Issuer’s Financials: Look at the most recent 10-K/10-Q for EBITDA trends, leverage, and liquidity.
  4. Rating Agency Commentary: These often highlight key risks and strengths.
• Time Management: Allocate ~30 minutes to skim the term sheet and financials, ~20 minutes for covenants and risks, and the remaining time for forming your pitch.

4. Quick Models for EBITDA, Deleveraging, and DSCR

• Key Ratios to Focus On:
  • EBITDA Margin: Helps assess profitability trends.
  • Leverage Ratio: Total Debt/EBITDA.
  • Interest Coverage Ratio: EBITDA/Interest Expense.
  • Debt Service Coverage Ratio (DSCR): (EBITDA - CapEx)/Debt Service.
• Shortcuts:
  • Use historical EBITDA growth rates to project forward.
  • Assume stable margins for IG issuers unless there’s a clear trend otherwise.
  • For deleveraging, focus on free cash flow (EBITDA - CapEx - Interest - Taxes) and its application to debt repayment.

5. Checklist Template for IG Bond Pitch

• Issuer Overview:
  • Industry, market position, and recent performance.
• Bond Details:
  • Coupon, maturity, call provisions, and covenants.
• Financial Analysis:
  • Key ratios (Leverage, DSCR, Interest Coverage).
  • EBITDA trends and free cash flow generation.
• Risks:
  • Industry-specific risks, covenant breaches, or macroeconomic factors.
• Recommendation:
  • Investment thesis (e.g., stable cash flows, strong credit metrics).

6. Advice from Similar Experiences

• Case Study Tips:
  • Focus on forming a clear investment thesis. Even if your model is simple, your ability to articulate risks and opportunities will stand out.
  • Practice summarizing your findings concisely. You’ll likely need to present your pitch in 5-10 minutes.
• Preparation:
  • Review recent IG bond issuances in the sector you’re targeting.
  • Practice building a quick model and writing a one-page summary.

By following this structured approach, you’ll be well-prepared to tackle the case study and impress your interviewers. Good luck!

Sources: https://www.wallstreetoasis.com/forum/investment-banking/how-to-prepare-for-restructuring-technical-questions?customgpt=1, How to Prepare for Restructuring Technical Questions, Private Credit Resources and Prep, Sources and Uses: How to Find and Use Information in IBD (EBITDA example), Q&A - Infrastructure PE & IBD