credit-ratings-risk — Debt Capital Markets Practice Questions

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1. In the context of Debt Capital Markets, what is a leverage-based margin ratchet?
2. Why is the Administrative Agent's role important for the margin ratchet?
3. In Debt Capital Markets, who is generally the 'payer' of the credit spread in a standard bond transaction?
4. What happens to the credit spread of a 'fallen angel' issuer?
5. In the expected loss framework, what is the relationship between the Recovery Rate (RR) and the Loss Given Def
6. What is the lowest rating an issuer can hold and still be considered 'Investment Grade' by S&P and Fitch?
7. In a Credit Default Swap (CDS), what is the primary obligation of the protection seller?
8. What does a 'negative basis' indicate?
9. Free Cash Flow (FCF) is considered more critical for credit analysis than accounting earnings because FCF repr
10. Which of the following actions would typically be classified as a 'Restricted Payment' under a standard high-y
11. What is the function of a 'Builder Basket' (or Cumulative Credit) in a high-yield covenant package?
12. A borrower's builder basket is often increased by 50% of which metric since the issue date of the notes?
13. Beyond dividends and buybacks, what is another typical category of cash outflow captured by a Restricted Payme
14. In the context of the Restricted Payments covenant, what is a 'Permitted Investment'?
15. Which of the following is NOT typically a 'Restricted Payment'?
16. A borrower has a 'General Basket' of $50 million for Restric… — How does this differ from the Builder Basket?
17. Which of these is NOT typically part of the formula that 'builds' a Restricted Payments basket?
18. What is the primary defining characteristic of a covenant-lite (cov-lite) loan?
19. In a cov-lite loan, which event would most likely trigger a financial ratio test?
20. Which of the following describes a 'Debt Incurrence' covenant?
21. In the context of credit covenants, what is the primary difference between a maintenance covenant and an incur
22. The Fixed-Charge Coverage Ratio (FCCR) is often considered a more stringent test than the Interest Coverage Ra
23. What is the primary reason an analyst might compute a 'Capital Expenditures-adjusted' coverage ratio?
24. In the context of 'Fundamental Credit Analysis', why is the 'Maturity Profile' (or maturity wall) important al
25. Which of these is a common 'event of default' for a PIK toggle note?
26. Why might a borrower prefer incurrence covenants over maintenance covenants?
27. What is the purpose of a 'Negative Pledge' covenant?
28. Which party is responsible for monitoring compliance with covenants on behalf of all bondholders?
29. Which of the following ratings is the 'highest' speculative-grade (high-yield) rating according to the S&P and
30. In fundamental credit analysis, how is the Interest Coverage Ratio typically calculated?