hey monkeys, would really appreciate help on any of these. If a company liquidates but the first lien debt is backed by assets that have a lower value than the first lien debt, what happens to the first lien debt? I understand the first lien debt is impaired/recovery ratio is less than 100%, but is there anything else to mention? How do you get the corresponding Enterprise Value from bond YTM? if equity is worth nothing...no other info given. I think the intuition is to use trading prices of the bond? no idea... How do WACC assumptions change depending on the tranches?

I'll take a stab (to follow as well) - don't work in RX though. 1) If your collateral is less than the value of debt then essentially anything remaining is regarded as senior unsecured (i.e. you'll share the value with other pari debt) 2) Remember EV = Eq + Net Debt. So while equity is "theoretically zero" - rmb it is never zero due to option value. You still have debt that adds up to EV. So yes you'll use trading prices (if given) or bond YTM (if they want you to make some calcs) to some up the value of debt. 3) Hmm - some within RX will have a better view.

Stumped on RX Technicals

hey monkeys, would really appreciate help on any of these.

If a company liquidates but the first lien debt is backed by assets that have a lower value than the first lien debt, what happens to the first lien debt? I understand the first lien debt is impaired/recovery ratio is less than 100%, but is there anything else to mention?
How do you get the corresponding Enterprise Value from bond YTM? if equity is worth nothing...no other info given. I think the intuition is to use trading prices of the bond? no idea...
How do WACC assumptions change depending on the tranches? I get different investors use diff COD (bond YTM, market value of debt, book value of debt) and COE (unlevered or levered beta), but which exactly is used in each tranche?

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