[URGENT] Debt fund modelling test
Hi monkeys,
Bit of a background: I've recently finished my CRE internship focusing on office/industrials. Did some modelling, but nothing extremely complex.
I'm currently interviewing with a boutique debt fund in continental Europe, and the second stage is a 2-hour modelling test. From what I was told, it's going to be a residential development with 2 tiers of debt (senior/mezzanine). I'm quite comfortable with development models, however never had to model out debt in two tiers.
So the questions are:
- How does senior/mezz look in a model? Does it require two different amort schedules or can everything be done in one (considering 2 hours to complete) and then summed into one line in cashflows?
- How do the different tiers affect the waterfall?
Thanks for the help!
You should build a separate amortization table for each loan. Combining all debt payments on the cash flow is up to you. That would look cleaner but has a higher chance of mistakes.
Having two loans won't affect your waterfall. Whatever cash flow you end up with after all debt service is what gets run through it. Why does a debt fund care about waterfalls anyway?
Thanks for explaining. 2- I'm not sure if waterfall is going to be included, but the guys during the interview mentioned the test would be the same as my equity-side models, so trying to prepare for everything just in case.
You'd want to know the DSCR & LTV for the senior loan and mezzanine loan. The pricing for those different levels of risk can make a total amount of debt too much, so the blended spread has to make sense.
Molestiae aperiam quod doloremque nihil deleniti est vitae. Dolores quidem autem quas eligendi eos repudiandae itaque.
Magni ratione molestias repellat rem adipisci. Officia distinctio sint tenetur voluptatem ea occaecati. Est dignissimos enim aut consequatur est. Cum molestiae adipisci voluptas.
Quae autem praesentium laboriosam expedita saepe cupiditate voluptatem. Et quia eum labore sequi provident.
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...