Distressed interview question

How much debt the company has? What's the seniority of the debt you are buying? What's the estimated liquidation value? Maybe something with interest coverage to get a sense if they are going to default soon

There are so many questions to ask re capital structure, deal dynamics, involved parties, company / industry info, financial outlook, cash and distributable assets available, etc

understand that there are many questions, but what about the ones particular to the figures given above (cents on the dollar and EBITDA) to arrive at a buy / pass decision? I'm assuming there's something around expected value derived from a probability of defualt

1. What EBITDA multiple is the company worth (So what is the EV of this company)
2. How much debt does the company have (face value)
3. What is the seniority of the debt you are buying.

This is all you need to know.

capital structure where u r in the capital structure what kind of company is this

apparently hashtag beat me to the same answer

That question is likely only driving at the creation multiple of the company through your tranche of debt vs. valuation multiple - also whether or not you'd be the fulcrum.

That said there are a ton of things that are tied to distressed that you could build on. Cap stack (tranche, ability to get primed, security), Liquidity runway (cash, capex, interest, maturities), liquidation value (underlying asset value), industry (where in cycle, position), catalyst, etc. etc. etc.

Bump

Not sure if I'm doing this correctly, but would you invest if the asset value of the firm is enough to cover your position in the cap structure? I.e. let's say the company is at a 5x EBITDA multiple (25mm EV) and has 50mm in debt--25mm in senior and 25mm in sub. I assume you would invest only if your debt is in the first 25mm (the senior debt). Would appreciate someone who knows more about this to chime in. I just started skimming Moyer's book so my knowledge is pretty limited.