Most bank debt trades around par unless it's distressed. Can you elaborate on what you're looking for exactly?
I have an interview, with a firm that specalizes in distressed bank debt. I did this back in school but would like to go over the valuation process to get the general flow of it down. I know there isnt a set of strict rules for valuation but was wondering if there was some general guidelines that most firms followed.
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Read up on distressed investing in general. Bank debt is usually senior secured, usually has covenants, etc.
Valuation for distressed debt of any kind usually involves figuring out an enterprise value (sometimes capital-structure neutral or anticipated post-reorg EV) and then applying that valuation to the various tranches of debt.
http://www.distressed-debt-investing.com/ is a great resource. Read Moyer's Distressed Debt Analysis as well if you have time.
There have been many great comebacks throughout history. Jesus was dead but then came back as an all-powerful God-Zombie.
Read up on distressed investing in general. Bank debt is usually senior secured, usually has covenants, etc.
Valuation for distressed debt of any kind usually involves figuring out an enterprise value (sometimes capital-structure neutral or anticipated post-reorg EV) and then applying that valuation to the various tranches of debt.
http://www.distressed-debt-investing.com/ is a great resource. Read Moyer's Distressed Debt Analysis as well if you have time.
Thanks, yea I dont have the time to read a long disertation on the subject, unfortunately my interview was scheduled yesterday for thursday morning and has since been moved upto tomorrow morning. Hopefully they wont ding me to bad for not knowing everything really indepth.
Follow the shit your fellow monkeys say @shitWSOsays
Life is hard, it's even harder when you're stupid - John Wayne
Value the company and waterfall it down the capital structure. It also involved reading the credit agreements, which isn't easy to get on bank debt. Essentially, the bank debt is worth the liquidation value of the assets serving as collateral. Any remaining value gap can go one of a few ways... first you'd have to figure out any intra-company cross guarentor structures amongst the various entities... then you'd have to figure out the value at each of those entities and the most senior claims at that entity... if there is any value left over there, it would go to the next tranch in the pecking order... which would be your guarentored bank debt. Likely won't be much if any value there. After all these avenues have been exausted... and there are alot of avenues since the guarentor entity may itself have guarentors so you literally bounce up to 2 or 3 or 4 different guarentor affiliates and see if there are any scraps of meat left to pick up... well once all that is exausted, you're usually secured by the parent equity which is usually worthless... and then it falls into the GUC (i.e. general unsecured claims) bucket... which is where all the unsecured and other secured who have already liquidated all their sources of value go.
Its a pretty tedious process which consists of literally understanding where value sits at each entity in the debtor's estate and understanding which claims sit at each entity and how the cross guarentors are structured. Essentially, in order to understand this you end up reading all the credit agreements and creating an entity chart with a clusterfuck of a web drawn all-over it tying all the entities together with various pieces of debt sitting at each entity. Have you ever wondered why there are HoldCo I, HoldCo II, HoldCo III, HoldCo IV and HoldCo V? Well this is when you learn exactly the purpose each and every entity serves.
In most cases, all this info isn't available so you need to make due with what you've got... but if you're holding distressed paper in a bankruptcy, you usually have most of the above information at your disposal to figure out what your investment is worth.
Value the company and waterfall it down the capital structure. It also involved reading the credit agreements, which isn't easy to get on bank debt. Essentially, the bank debt is worth the liquidation value of the assets serving as collateral. Any remaining value gap can go one of a few ways... first you'd have to figure out any intra-company cross guarentor structures amongst the various entities... then you'd have to figure out the value at each of those entities and the most senior claims at that entity... if there is any value left over there, it would go to the next tranch in the pecking order... which would be your guarentored bank debt. Likely won't be much if any value there. After all these avenues have been exausted... and there are alot of avenues since the guarentor entity may itself have guarentors so you literally bounce up to 2 or 3 or 4 different guarentor affiliates and see if there are any scraps of meat left to pick up... well once all that is exausted, you're usually secured by the parent equity which is usually worthless... and then it falls into the GUC (i.e. general unsecured claims) bucket... which is where all the unsecured and other secured who have already liquidated all their sources of value go.
Its a pretty tedious process which consists of literally understanding where value sits at each entity in the debtor's estate and understanding which claims sit at each entity and how the cross guarentors are structured. Essentially, in order to understand this you end up reading all the credit agreements and creating an entity chart with a clusterfuck of a web drawn all-over it tying all the entities together with various pieces of debt sitting at each entity. Have you ever wondered why there are HoldCo I, HoldCo II, HoldCo III, HoldCo IV and HoldCo V? Well this is when you learn exactly the purpose each and every entity serves.
In most cases, all this info isn't available so you need to make due with what you've got... but if you're holding distressed paper in a bankruptcy, you usually have most of the above information at your disposal to figure out what your investment is worth.
Sounds like a blast.
Follow the shit your fellow monkeys say @shitWSOsays
Life is hard, it's even harder when you're stupid - John Wayne
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Most bank debt trades around par unless it's distressed. Can you elaborate on what you're looking for exactly?
I have an interview, with a firm that specalizes in distressed bank debt. I did this back in school but would like to go over the valuation process to get the general flow of it down. I know there isnt a set of strict rules for valuation but was wondering if there was some general guidelines that most firms followed.
Read up on distressed investing in general. Bank debt is usually senior secured, usually has covenants, etc. Valuation for distressed debt of any kind usually involves figuring out an enterprise value (sometimes capital-structure neutral or anticipated post-reorg EV) and then applying that valuation to the various tranches of debt. http://www.distressed-debt-investing.com/ is a great resource. Read Moyer's Distressed Debt Analysis as well if you have time.
Thanks, yea I dont have the time to read a long disertation on the subject, unfortunately my interview was scheduled yesterday for thursday morning and has since been moved upto tomorrow morning. Hopefully they wont ding me to bad for not knowing everything really indepth.
investopedia.com
All ready checked there, doesnt have shit.
Value the company and waterfall it down the capital structure. It also involved reading the credit agreements, which isn't easy to get on bank debt. Essentially, the bank debt is worth the liquidation value of the assets serving as collateral. Any remaining value gap can go one of a few ways... first you'd have to figure out any intra-company cross guarentor structures amongst the various entities... then you'd have to figure out the value at each of those entities and the most senior claims at that entity... if there is any value left over there, it would go to the next tranch in the pecking order... which would be your guarentored bank debt. Likely won't be much if any value there. After all these avenues have been exausted... and there are alot of avenues since the guarentor entity may itself have guarentors so you literally bounce up to 2 or 3 or 4 different guarentor affiliates and see if there are any scraps of meat left to pick up... well once all that is exausted, you're usually secured by the parent equity which is usually worthless... and then it falls into the GUC (i.e. general unsecured claims) bucket... which is where all the unsecured and other secured who have already liquidated all their sources of value go.
Its a pretty tedious process which consists of literally understanding where value sits at each entity in the debtor's estate and understanding which claims sit at each entity and how the cross guarentors are structured. Essentially, in order to understand this you end up reading all the credit agreements and creating an entity chart with a clusterfuck of a web drawn all-over it tying all the entities together with various pieces of debt sitting at each entity. Have you ever wondered why there are HoldCo I, HoldCo II, HoldCo III, HoldCo IV and HoldCo V? Well this is when you learn exactly the purpose each and every entity serves.
In most cases, all this info isn't available so you need to make due with what you've got... but if you're holding distressed paper in a bankruptcy, you usually have most of the above information at your disposal to figure out what your investment is worth.
Sounds like a blast.
^--- yeah, I usually do it while sippin on syzurp
Iste et nihil possimus. Dolorum voluptatem voluptatibus similique reiciendis porro ad quia.
Voluptatem et omnis est et velit omnis. Dolorem expedita natus itaque fuga. Praesentium dolorum quasi sunt et. Illo suscipit quas animi impedit. Iure voluptatem maiores quis saepe voluptas. Dolores fugit illo at repellat maiores. Aspernatur facere repellendus eveniet et. Necessitatibus modi porro eveniet quia laboriosam nostrum pariatur.
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