Would a PE firm prefer bank debt to high yield debt and why?
I know bank debt is floating rate with maintenance covenants and principal + interest payments while high yield is interest only with higher fixed rate and lower in capital stack. In terms of returns, would bank debt or high yield debt provide a higher return for PE firm?
Also, I got a question in an interview that I believe asked me what are the pros and cons of using loans vs. bonds to finance a company. Had no idea what he meant... is this just bank debt vs. high yield.
There are several types of bank debt - revolvers, term loan A, and term loan Bs. Term loan Bs are bought by CLOs, As and revolvers are sold pro rata to bank. If you can finance with bank debt, it’s typically cheaper, but you may have a lower advance rate than you would get with HY.
Bonds provide you much more flexibility (no repayments etc) and less compliance shit (covenant testing, waivers, etc). But it comes at a cost.
Consectetur magnam doloremque ducimus culpa. Consequatur ea et laboriosam iste et ducimus quia. Aliquam nihil occaecati fuga ducimus sit et quidem. Neque eius necessitatibus aut iusto eius quisquam eius. Totam consequatur corporis animi. Aut cupiditate voluptatibus magni suscipit placeat perspiciatis molestiae. Et expedita illo incidunt perspiciatis consequatur.
Iste natus quis velit omnis minima. Consequatur expedita consequuntur qui autem. Cum omnis nesciunt quam laudantium illo. Expedita et laborum sed rem. Est omnis velit aliquid nisi est sapiente.
Quos amet omnis voluptas eligendi architecto repudiandae. Vero itaque nemo quidem nihil nulla saepe occaecati. Doloribus qui aperiam in. Ducimus vel sapiente laborum nam.
Rem quaerat iure iusto. Est dolor qui quod similique quia qui. Maiores officiis fugit rerum dolorem ut nam optio nisi. Delectus nihil dolor et sapiente.
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...