Credit Special Sits 4-hr Case Study upcoming - any prep tips?

Based on the most helpful WSO content, here’s how you can prepare effectively for your 4-hour credit special situations case study:

1. Understand the Key Objectives

• Your goal is to analyze the provided P&L, Cash Flow, and IM/Info pack to determine the best investment opportunity in the capital structure (e.g., senior, unitranche, mezzanine).
• Focus on identifying recession-resistant investments with strong revenue visibility, diverse customer bases, and solid margins.

2. Preparation Tips

• Modeling Practice:
  • Continue practicing simple P&L, Cash Flow, and Debt Schedule models. Ensure you can calculate MOIC (Multiple on Invested Capital) and IRR (Internal Rate of Return) efficiently.
  • Build functionality to adjust key sensitivities (e.g., revenue growth, margin compression) to test various scenarios.
• Debt Primer: Brush up on debt structures and their risk-return profiles. Understand how different layers of the capital stack behave under stress scenarios.
• Key Metrics: Focus on metrics like leverage ratios, interest coverage, and free cash flow generation. These will help you assess the company’s ability to service debt and withstand downturns.

3. Case Study Execution

• Hour 1:
  • Thoroughly review the IM/Info pack and take detailed notes. Identify key revenue drivers, cash flow trends, and any red flags.
  • Understand the company’s business model, competitive positioning, and industry dynamics.
• Hours 2-3:
  • Build your model starting with revenue drivers and working down to free cash flow. Incorporate a debt schedule and calculate MOIC/IRR for different parts of the capital stack.
  • Perform sensitivity analyses to stress-test your assumptions.
• Hour 3.5:
  • Develop your investment thesis. Highlight why your chosen position in the capital stack offers the best risk-adjusted return.
  • Compare your findings to any management guidance or industry benchmarks provided.
• Hour 4:
  • Draft a concise recommendation. Include your rationale, key assumptions, and next steps for further diligence.

4. Debrief Preparation

• Be ready to explain your model structure, assumptions, and the reasoning behind your recommendation.
• Anticipate questions about risks, alternative scenarios, and how you accounted for uncertainties.

5. Additional Resources

• Review WSO’s financial modeling lessons and templates to refine your skills.
• If time permits, practice with mock case studies or similar exercises to simulate the time pressure.

By focusing on these steps, you’ll be well-prepared to tackle the case study and impress during the debrief. Good luck!

Sources: How would you approach a 4 hour case study?, Private Credit Case Study, Q&A: Former MBB Consultant, Case Prep