Was reading that for RX interviews I should know waterfalls. Wanted to see what that is.
Does that just mean that I should have a solid grasp on capital structure? If so, any sources available?
Thanks
| +171 | Why UBS Is the Worst Place to Start Your IB Career | 32 | 3m |
| +159 | ONLY THESE BANKS OR YOU STRUCK OUT | 39 | 7h |
| +115 | IB Energy Drink Tier List / Ranking | 74 | 6h |
| +65 | Firm Thinks I'm Lying About Offer | 20 | 6h |
| +54 | Indiana University Fraternity Pipelines | 34 | 5h |
| +42 | Rogo AI | 18 | 1h |
| +39 | Stay at Weak Dealflow Team or Lateral? | 12 | 1d |
| +37 | Elite Boutique interview questions | 8 | 1d |
| +33 | Suspended for a Year | 12 | 4h |
| +22 | 1st Half 2026 (1H26) RX IB & RX Co. Rankings | 14 | 2d |
Career Resources
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
Hi TheAvenged, whoops, looks like nobody chimed in here.... maybe one of these discussions below is relevant:
You're welcome.
This is a matter of priority. At the simplest level, we have lien priority, which is typically contractual, and sets out how high or low a particular tranche of debt is in the capital structure. This determines what different debtholders are entitled to if the company collapses bases on the seniority of the loans. It's considered a waterfall because payments from the company go to first lien debtholders first, then other debtholders later, then equity holders.
We also have collateral priority, which may be distinct from the lien one. The debt could be secured to a particular asset, in which case it would be entitled to that collateral in priority of other generalised debtholders.
Finally we have structural priority, which is about subsidiaries. Essentially, subsidiaries should be treated as seperate companies entirely. They have their own set of creditors, which have priority over the creditors of the parent company. Only after all their claims have been settled, then the remainder is upstreamed to the parent as equity dividends, and that can be disbursed to the parents creditors.
This generally captures how it works, but to be clear, liens are on collateral. You shouldn’t separate them. If I’m first lien but my collateral is worth $0, then it’s effectively an unsecured claim.
Absolutely correct, but I was attempting to limit the confusion!
.
Molestiae quaerat est itaque maiores distinctio. Asperiores dolorum quia voluptas ut. Voluptatibus cumque quo ipsum magnam quia aut veritatis.
Eum quidem aut sequi enim natus. Aut ipsa modi veritatis eaque quia. Nostrum veritatis corrupti amet nesciunt saepe itaque. Nam enim est autem occaecati tenetur non qui itaque.
Nisi aut sit velit temporibus nisi aperiam. Laudantium aut qui quo. Minima vero dicta sunt tenetur.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...