Underwriting
Price the unitranche
A sponsor wants $340m of unitranche at 5.6x leverage for a software rollup. Two rivals are quoting inside your screen price and the sponsor is telling everyone so.
All simulators
Underwriting, covenants and sponsor dynamics
Private Credit simulator
Your seat: Underwriting desk, direct lending fund
Your upside is a coupon and your downside is the principal. Win deals on structure rather than price, and find out early when a borrower slips.
What you'll learn
- Why mispriced credit risk can never be earned back on the upside
- How add-backs, cov-lite documents and transfer blockers change recoveries
- What to do at the first covenant breach: cure, reprice, or walk
Who it's for
Direct lending, leveraged finance and restructuring 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.
Documentation
Cov-lite, EBITDA add-backs, and page 212
The credit agreement permits uncapped run-rate synergy add-backs and no maintenance covenant. The sponsor calls it market standard. It is market standard.
Transition risk
Lending against a diesel fleet
A logistics borrower needs $180m to refinance. Its collateral is 1,400 diesel trucks with a residual value that assumes today's emissions rules hold for eight more years.
The ladder
Each rank has its own bar for returns and standing. Clear both to move up.
- Credit Analyst
- Underwriter
- Portfolio Manager
- Head of Underwriting
- Head of Private Credit
- Chief Investment Officer
Terms you'll use
- Spread
- Margin over the reference rate, quoted in basis points.
- Upfront fee
- One-off fee taken at closing.
- Tenor
- How long the money is committed for.
- Coverage ratio
- Earnings divided by interest cost.
- Covenant
- A contractual test that hands you rights when the business deteriorates.
- Cov-lite
- A loan with no maintenance covenant tests.
- Default and recovery
- The borrower stops paying; you collect what the collateral is worth.
- Concentration
- Too much of the book in one sector or one name.