Commitment
Where to set talk
A sponsor wants your commitment at S+375 at par with 50bps of flex. Comparable B2 loans are clearing at S+425 at 99.5.
All simulators
Underwriting, flex and the book-build
Leveraged Finance simulator
Your seat: Leveraged finance and DCM desk, global bank
Commit the bank's balance sheet to a sponsor's buyout debt, then sell it. Price talk, OID and flex decide whether the book clears, eats your fee, or leaves the deal hung on your balance sheet.
What you'll learn
- How price talk, OID and flex absorb a market that moves before launch
- Why allocations, ratings and the CLO bid decide where a loan clears
- Which covenant baskets and blockers matter when a borrower gets into trouble
Who it's for
Leveraged finance, DCM, syndicate and credit sales candidates.
It works as interview prep: you'll have made the calls an interviewer asks about, and seen what happens when you get them wrong.
Decisions from your first year
Three calls a year. Here's the kind of thing that lands on your desk before your first promotion.
Book-building
Who gets the paper?
The book is three times covered, but a third of the orders come from fast-money accounts known to inflate orders and flip on day one.
Documentation
Cov-lite, with baskets
The sponsor wants cov-lite with a 'freebie' incremental basket of 1.5x EBITDA and uncapped add-backs for projected cost savings. Investors are pushing back on the add-backs.
The ladder
Each rank has its own bar for returns and standing. Clear both to move up.
- Analyst
- Associate
- Vice President
- Director
- Managing Director
- Global Head
Terms you'll use
- Price talk
- The spread an underwriter markets a new loan at.
- OID
- Original issue discount: a loan sold below par.
- Flex
- The underwriter's right to change pricing within a cap if demand is weak.
- Hung deal
- A committed financing the banks can't sell at an acceptable price.
- Bridge loan
- A committed loan funded only if long-term financing can't be raised in time.
- Leverage
- Total debt divided by EBITDA.
- Spread
- Margin over the reference rate, quoted in basis points.