Levered Finance Interview - Typical questions to expect?
All,
I will be interviewing for the leveraged finance positions.
Could someone share with me what are some typical questions to expect?
Also, what is the likelihood to transition to DCM (Investment/high grade debt capital market)?
thank you,
you want out of levfin?
Yes, that is the ultimate goal but now is to get into LevFin as that department is hiring.
Typical questions you can expect:
1) What makes a good lbo target from a debt financing point of view (non cyclical industry, leading position vs. peers, strong market shares, recurring cash-flows, high barriers to entry (e.g. licenses), visibility on earnings/contracted revenue, credit worthiness of clients/suppliers and concentration of both, ease of access to supply, no exposure to commodities etc etc)
2) Why is using financing more interesting than equity from the sponsor's point of view? (interests are tax deductible and a a sponsor which buys a target with 30% equity will own 100% in 5 years' time once all debt has been repaid with the target's cash flows)
3) How do you calculate free cash flow? how does the calc differ for DCF perspective
3) Cite some examples of LBOs that went well and some that failed and explain why (I'll let you do the research)
4) What's the typical debt structure (senior term loan A amortizing 5 years, TLB 6 bullet years, TL C or mezzanine bullet, pricing etc)
5) Depending if you're interviewing for analyst or associate, they'll dig into your knowledge of term sheet / documentation (syndications clauses, typical financial covenants, headroom, typical security package etc etc)
Am I reading this correctly? Are there different calculations for free cash flow used in finance other than the way its calculated in a DCF?
EDIT: Ah nevermind. Brain cramp. You meant cash flow on the CFS vs the DCF. Got it now.
levered in lbo, unlevered in dcf don't they teach you this stuff at stern haha
which bank are you interviewing at? you may want to look at BMO which combines both ig/hy under dcm. you can get the best of both worlds.
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