Case Study question
Hi All,
I've been sent a case study for a particular company and have been asked to assess whether or not I would invest in the senior notes.
1) My approach is to essentially write a credit memo, covering strengths, weaknesses+mitigants, high- level cashflow model etc Is there anything else I should include in the paper?
2) how would I assess whether or not I should invest in the notes. Let's say the notes are trading at 85, would I calculate the YTM and if this is greater than the notes coupon, then yes? Or should I be looking at EV and assessing whether or not there is sufficient debt coverage?
3) Also been provided with an OM - is there anything I should look out for in particular in this document?
Thanks in advance
It’s 3:20 AM on the WC - so sorry for the brevity.
My thoughts - since it’s senior I’d be focused on achieving full return of capital i.e. make sure you read the documents fully as 1st priority. They may have put some weird things in to see if you would catch them as they would need you to and escalate on the job.
But also make sure your deleveraging model trends properly and that the underlying business is sound etc.
Another big thing is check out the collateral and issuance language in the OM. Is the collateral worth anything to other buyers? Under what conditions can you be primed? What is the basket and what contributes to the basket. Is there anything unusual here? What is the default language, do you have cross-defaults on debt that is junior to you etc? At what entity is the loan being issued from? Are there any collateral carve outs?
Thanks for this. I've had a look and I can see i) PIK issued to parent company outside the restricted group ii) in the event of enforcement, noteholders will be repaid after RCF and other hedging obligations ahve been paid in full iii) notes are effectively subordinated to any existing and future indebtedness or obligations of the Issuer that is secured by property or assets that do not secure the Notes iv) guarantees may be removeed without consent of the holders
Are any of the above issues?
thanks
Veritatis nihil officia dolorem repudiandae. Officia quas distinctio quis maiores aut sint dignissimos. Accusantium similique et vero autem vitae aut.
Non et modi voluptate possimus sapiente cupiditate non. Doloribus accusamus excepturi quia nesciunt earum. Aut ad consequatur praesentium rem optio placeat. Vel ex nobis nihil vero. Porro mollitia porro similique ullam in necessitatibus ut sed. Aliquid at sit est odio voluptatem molestias.
Consequatur voluptatem aliquam non provident quia earum eaque. Ut ducimus quidem velit eligendi et libero necessitatibus. Unde ea rerum doloremque maiores quia voluptatum. Ipsa reprehenderit doloribus corporis quidem sunt aut qui. Quidem reiciendis quae eum fugit ea et nostrum. Sint alias ea quam repudiandae. Et sunt modi rerum fugit illum commodi.
Blanditiis rerum est accusamus quas. Atque occaecati minima et at aperiam voluptas sint ullam.
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...