Credit case study
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bump! Would truly appreciate any and all guidance!
What do you mean a SSN for a failing company at 92?
Basically evaluating whether investing a SSN in this struggling dental company at 92c on the dollar (for its market price) would be a sound investment.
The email then outlines some basic info, including its financials, OM, investor memo, LP letter, pitch deck etc.
Struggling is different from failing, and if trading at 92 in the current environment, it's probably okay, albeit not the best. But price is the wrong metric to look at, look at yield to maturity and if you have time yield to worst.
Overall, since this is for an internship, just put together a few pages outlining what the company does (try to cover the basics, suppliers/customers/main cost items), the market it operates in (price environment, regulation, competition etc) and identifiy 3-5 risks (could be labour shortage since you mentioned dental company, or competition etc) and 3-5 benefits (aging population is always a good one for healthcare adjacent names).
Oh and the first thing is, put together a tidy cap structure that outlines EBITDA and leverage, and asses if it's a sound debt stack for the type of company (e.g a stable healthcare co can take on more debt, while for a commodity chemical co at top of the cycle you'd want very low leverage).
Then move to financials and focus on cash generation in particular. If you need to put together a model just keep it high level and spend most of your time in coming up with defesinble assumptions, which don't need to be overly complicated.
FInally put together a reccomendation. Just weigh up prosand cons vs the return you'd get, but again keep it simple, if you can compare it vs other bonds (and their yield) fine but don't try to be too fancy.
G'luck.
What's your background? I'm in uni and would have no idea how to even approach this
2nd year law student at a top Uk target
Position is for a specialist credit fund (last round)
I only have a very rough guide (5 slides required on powerpoint) and a ton of raw material
Super confused on how to go about this
DM me and I can send over a sample
key questions is whether a) in liquidation, what's the remaining asset value - are / how much are you "covered" from an LTV perspective b) Can company make coupon payments c) what's your IRR / YTM?
Take a more holistic approach. Look at a debt instrument's fair value / cost. Anything below 90% would be considered "stressed" and anything below 75% would generally be entering highly stressed territory (general rule of thumb). Case study could include evaluating different scenarios:
I could go on with dozens of scenarios, but these are some high level thoughts for a case study.
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