Glossary
Every number the game shows you, defined in a sentence or two, plus a note on where it tends to catch people out mid-run.
42 terms
Deal economics
Earnings before interest, tax, depreciation and amortisation.
A rough proxy for the cash a business throws off before financing and accounting choices. Every multiple, leverage figure and coverage ratio on the desk is quoted against it, which is exactly why sellers work so hard to flatter it.
In the run — Deal cards quote EBITDA; leverage and debt quantum are derived from it.
Deal economics
Price paid as a multiple of EBITDA.
Pay 11x instead of 9x and you have pre-spent two turns of value creation. Multiple paid is the single decision that most reliably survives every operating plan.
In the run — Higher entry prices cost cash and squeeze the return you can still earn.
Deal economics
Total debt divided by EBITDA.
Debt magnifies both directions. At 4x a bad year is uncomfortable; at 6.5x the same year is a restructuring. Leverage is a volatility dial dressed up as a financing choice.
In the run — The leverage cap slider moves acceptance odds, income and breach risk together.
Deal economics
Margin over the reference rate, quoted in basis points.
What you are paid for taking the credit risk. Push spread up and you earn more per year but make yourself easier to outbid; 100bps equals one percent.
In the run — Spread is the main negotiation lever: it lifts income and lowers acceptance probability.
Deal economics
One-off fee taken at closing.
Cash today rather than yield over time. Useful when you doubt the asset will stay outstanding long enough for the spread to matter, and expensive for the borrower's own returns.
In the run — Fees pay into cash immediately but are the first thing a borrower pushes back on.
Deal economics
How long the money is committed for.
Longer tenor means more years of income and more years of things going wrong. Short tenor gets your capital back before the cycle turns, at a lower total return.
In the run — Tenor sets how many periods a position accrues before it matures or refinances.
Credit and risk
Earnings divided by interest cost.
The margin for error. Above 2.5x the borrower can absorb a bad quarter; near 1.2x a rate move or a lost contract stops the payments. The most honest number on a credit paper.
In the run — Positions below roughly 1.3x coverage are flagged and are the ones that breach.
Credit and risk
A contractual test that hands you rights when the business deteriorates.
Maintenance covenants are tested every period and let you act early. Losing them does not change whether a company fails, only whether you find out in time to do anything.
In the run — Strict covenants trigger the workout room early; cov-lite delays it until value is gone.
Credit and risk
A loan with no maintenance covenant tests.
Standard in competitive markets. You win the deal and give up the tripwire, so problems surface late, when the recovery you can negotiate is materially worse.
In the run — Cov-lite books raise acceptance odds and cut recoveries; the debrief flags heavy exposure.
Credit and risk
A failed test, and the negotiation that follows.
Amend and extend buys time for a fee, new capital defends value if you believe the plan, debt-for-equity swaps trade your claim for ownership, and foreclosure crystallises a loss and a reputation cost.
In the run — Each workout action has a recovery range and a reputation consequence.
Credit and risk
The borrower stops paying; you collect what the collateral is worth.
Recovery, not default probability, is what separates a dull loss from a fatal one. Seniority, collateral quality and how early you acted dominate the outcome.
In the run — Defaults write down invested capital by the recovery shortfall and dent reputation.
Credit and risk
Too much of the book in one sector or one name.
Diversification is the only free protection in finance. A book that is 60% one sector is a single bet with extra paperwork.
In the run — The debrief calls out sector concentration when it drove the outcome.
Returns and fees
The annualised rate of return, weighted by timing.
Rewards getting money back quickly, which is why fast exits and recapitalisations flatter it. It can look excellent on a deal that returned little in absolute terms.
In the run — Fund IRR is a promotion hurdle at every rank.
Returns and fees
Total cash out divided by cash in.
The honest counterweight to IRR: it asks how much you actually made rather than how fast. The two disagree constantly, and which one gets quoted tells you who is talking.
In the run — Long holds that keep earning income score well here even when IRR looks unremarkable.
Returns and fees
Assets under management.
The base that fees are charged on, and therefore the number the platform is actually run for. Growing it is something you choose to do. It doesn't just happen.
In the run — AUM feeds your score and gates the later ranks.
Returns and fees
Committed capital not yet deployed.
Optionality with a cost: undeployed capital earns nothing and drags returns, but capital deployed into a hot market at the wrong price is worse.
In the run — Cash is your dry powder; running it to zero ends the run.
Returns and fees
The manager's share of profits above a hurdle.
Typically 20% over an 8% preferred return. It is an option on the fund's upside, which is precisely why incentives tilt towards risk in a weak vintage.
In the run — Year-end bonuses model the same asymmetry.
Returns and fees
The prevailing pricing and risk environment.
Stable, tightening, risk-off or distressed. The same terms are generous in one regime and uncompetitive in another, and the regime changes without asking your permission.
In the run — Regime shifts each year, moving deal supply, pricing and breach rates.
Climate and transition
The risk that policy and technology strand your asset.
Carbon pricing, efficiency mandates and shifting demand can make a profitable business uninvestable long before it becomes unprofitable. It arrives through refinancing markets first.
In the run — High-carbon books get harder to refinance as challenge runs progress.
Climate and transition
Damage and disruption from a changing climate.
Heat, flood, drought and the withdrawal of insurance. Insurers reprice before valuations do, so an uninsurable asset is usually the first honest signal.
In the run — Alpine and infrastructure scenarios price this directly into asset values.
Climate and transition
An asset written down before the end of its economic life.
The endpoint of transition risk. The loss is rarely a single event; it is a refinancing that never happens at a price anyone will accept.
In the run — Challenge runs put stranded books on your desk and ask what you do with them.
Climate and transition
The carbon footprint of what you own, not what you occupy.
Financed emissions dwarf operational ones for any investor. Halving them by selling the worst assets to a less scrupulous buyer makes your report look better and does nothing for the atmosphere.
In the run — The carbon stat tracks the book; climate challenges set a hard ceiling on it.
Climate and transition
Capital spent per tonne of CO2e avoided.
The only number that lets you compare a heat pump retrofit with a grid battery. A cheap project that abates nothing is worse than an expensive one that abates a lot, and a tariff that looks generous is often just paying for measurement you never did.
In the run — The climate desk quotes it on every project card; low cost per tonne clears the mandate faster.
Returns and fees
Investors withdrawing capital from an open-ended fund.
Redeemable seats (hedge funds, most asset management mandates, some quant vehicles) hand your investors an exit you cannot veto. Weak trailing returns arrive as a capital call in reverse: you sell into the same market that hurt you.
In the run — Weak IRR and reputation at year close can trigger a redemption notice that cuts AUM and cash.
Returns and fees
Committed capital not yet deployed.
The upside of a good year: investors re-up and hand you fresh capital. The catch is that a larger fund has to find larger deals, so the hurdle you must clear quietly rises with the raise.
In the run — A strong year can close a fundraise that adds cash and AUM but nudges your return expectation down.
Deal economics
What similar listed companies trade at, as multiples of earnings.
The quickest read of value, and the easiest to bend: pick faster-growing peers and the multiple rises without any buyer agreeing to pay it.
In the run — Mandate cards show comps next to precedents and the DCF; your pitch is quoted as a premium to comps.
Deal economics
Multiples paid in past acquisitions of similar companies.
They include a control premium, and the financing and mood of the year they were struck. A precedent from a hot market is a ceiling, not a guide.
In the run — The football field on each mandate shows precedents above comps.
Deal economics
Whether an acquisition raises or lowers the buyer's earnings per share.
Paid in stock, a deal is accretive when the target's earnings yield on the price beats the buyer's own (1 ÷ P/E); paid in debt, when it beats the after-tax interest rate. Accretion says nothing about whether the price was right.
In the run — Mandate cards show accretion at your number in years one and two; above the buyer's breakeven, bids disappoint.
Deal economics
Cost savings or extra revenue from combining two businesses.
Cost synergies are mostly in the buyer's control; revenue synergies depend on customers. Both take years to phase in and cost money to achieve.
In the run — The strategic buyer's capacity counts its cost synergies; the revenue synergies its deck claims are shown, not paid for.
Deal economics
A bank's opinion that a price is fair, financially, to a company's holders.
Narrow by design: it doesn't say the price is the best available. Its value depends on the bank's independence and how it is paid.
In the run — Conflicts scenarios ask whether to give one, and what to disclose.
Deal economics
A period when a seller negotiates with one bidder only.
It buys certainty and costs competitive tension. Bidders often use it to re-trade once the others have gone.
In the run — In the bid review room, exclusivity firms up most deals and lets some bidders cut their price.
Credit and risk
The spread an underwriter markets a new loan at.
Set at commitment and tested at launch. Too tight wins the mandate and risks the book; too wide costs the sponsor and the next mandate.
In the run — The leveraged finance desk's price slider; talk plus OID is what investors compare to where paper clears.
Credit and risk
Original issue discount: a loan sold below par.
A 98 issue price gives investors two points up front. Desks treat a point as about 25bps a year over a four-year life.
In the run — The OID slider on the leveraged finance desk; past the flex cap, the bank adds OID out of its own fee.
Credit and risk
The underwriter's right to change pricing within a cap if demand is weak.
Upward flex protects the bank; reverse flex cuts the price for the sponsor when the book is oversubscribed. The cap is a contract.
In the run — The flex cap slider decides how much widening your commitment absorbs before your fee does.
Credit and risk
A committed financing the banks can't sell at an acceptable price.
The bank funds it and holds it, or sells at a discount. Hung deals tie up capital that the desk needs for new business.
In the run — A book that won't clear inside flex and fee goes to the hung deal room: sell, hold or ask the sponsor.
Credit and risk
A committed loan funded only if long-term financing can't be raised in time.
It gives a seller certainty that the buyer can pay. If bond markets shut before closing, the banks fund it themselves.
In the run — Bridge scenarios ask whether to commit alone or in a club, and with which protections.
Credit and risk
US court reorganisation: the company keeps operating while creditors vote on a plan.
It brings an automatic stay, DIP financing and class voting that binds dissenters. Out-of-court exchanges are faster but bind only those who agree.
In the run — The restructuring desk's route toggle: Chapter 11 or out of court.
Credit and risk
Debtor-in-possession loans to a company in Chapter 11.
Court-approved, with super-priority. Often provided by existing lenders with a roll-up of their pre-filing debt.
In the run — DIP scenarios ask whose money to take, and at what cost to other creditors.
Credit and risk
No junior class gets value while a dissenting senior class isn't paid in full.
The rule that makes a cramdown 'fair and equitable'. Gifts that skip a dissenting class run into it.
In the run — The plan negotiations room checks it before a cramdown; breaking it gets confirmation denied.
Credit and risk
Confirming a plan over a class that voted no.
Needs one impaired class voting yes, a feasible plan, absolute priority and a value the court accepts.
In the run — An option in the plan negotiations room when the vote splits.
Credit and risk
The class where value runs out, which usually takes the reorganised equity.
Senior classes are paid in full; junior ones get nothing; the fulcrum gets part, so it fights hardest over the valuation.
In the run — Credit bids in the plan room are efficient only when the first lien is the fulcrum.
Credit and risk
A secured lender buying collateral by bidding its claim instead of cash.
Protects lenders from a cheap sale; can deter cash bidders. Best run as a stalking horse with an auction behind it.
In the run — The section 363 option in the plan negotiations room.
These numbers only mean something once they cost you money. Take a seat and negotiate a deal with them.