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?

1 Comments

IB

Analyst 2 in IB - Gen

6y

Most Helpful

Libero atque molestiae id neque. Tempora quaerat neque doloremque quibusdam quisquam. Sit at optio sit non et ut quisquam fugit. Id dolor dolore qui illo eos deserunt.

Voluptas eius accusantium et eveniet incidunt consequuntur. Reiciendis eos culpa ab possimus rem consequatur sequi. Ut repellat nihil aut esse. Voluptate inventore eaque ratione sed nulla perferendis perferendis.

Reply

Quote

Report

Other

Authored by: Certified Investment Banking Professional - 2nd Year AnalystCertified Investment Banking Pro

+120	Hot take: I’d rather be at Desjardins than UBS for investment banking in 2026	19	6h
+102	Woman who emptied Knicks trashcan on street then stole it was DEI exec, worked at JPMorgan Chase	25	2d
+88	Stop sleeping on UBS - it’s pretty good	29	1d
+59	2026 VAULT PRESTIGE RANKINGS	33	7h
+49	Hardest interview experiences?	32	35m
+39	AI + Financial Modelling	12	3d
+31	Summer before college	25	1d
+27	Full-time lateral advice	8	20h
+26	Current State of UBS in North America	8	4d
+26	People who work/worked in FIG IB at a BB: does FIG really pigeonhole you as bad as people say?	5	1d

1	redever	99.2
2	BankonBanking	99.0
3	kanon	99.0
4	Secyh62	99.0
5	CompBanker	98.9
6	GameTheory	98.9
7	Betsy Massar	98.9
8	dosk17	98.9
9	DrApeman	98.9
10	bolo up	98.8

Elite Career Bootcamp. Top Job Offer Guaranteed.

Elite Career Bootcamp. Top Job Offer Guaranteed.

Stumped on RX Technicals

Elite Career Bootcamp. Top Job Offer Guaranteed.

Elite Career Bootcamp. Top Job Offer Guaranteed.

Stumped on RX Technicals

See All Comments - 100% Free

Trending Content - Investment Banking Forum