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. What happens to the credit spread of a 'fallen angel' issuer?
4. In Debt Capital Markets, who is generally the 'payer' of the credit spread in a standard bond transaction?
5. In a cov-lite loan, which event would most likely trigger a financial ratio test?
6. In the context of credit covenants, what is the primary difference between a maintenance covenant and an incur
7. In a Credit Default Swap (CDS), what is the primary obligation of the protection seller?
8. Which of the following is NOT typically a 'Restricted Payment'?
9. The Fixed-Charge Coverage Ratio (FCCR) is often considered a more stringent test than the Interest Coverage Ra
10. Which of these is NOT typically part of the formula that 'builds' a Restricted Payments basket?
11. Which of the following describes a 'Debt Incurrence' covenant?
12. What is the primary reason an analyst might compute a 'Capital Expenditures-adjusted' coverage ratio?
13. What is the lowest rating an issuer can hold and still be considered 'Investment Grade' by S&P and Fitch?
14. Which of the following actions would typically be classified as a 'Restricted Payment' under a standard high-y
15. What is the function of a 'Builder Basket' (or Cumulative Credit) in a high-yield covenant package?
16. In the context of 'Fundamental Credit Analysis', why is the 'Maturity Profile' (or maturity wall) important al
17. A borrower's builder basket is often increased by 50% of which metric since the issue date of the notes?
18. In the context of the Restricted Payments covenant, what is a 'Permitted Investment'?
19. What does a 'negative basis' indicate?
20. Free Cash Flow (FCF) is considered more critical for credit analysis than accounting earnings because FCF repr
21. What is the primary defining characteristic of a covenant-lite (cov-lite) loan?
22. In the expected loss framework, what is the relationship between the Recovery Rate (RR) and the Loss Given Def
23. Beyond dividends and buybacks, what is another typical category of cash outflow captured by a Restricted Payme
24. A borrower has a 'General Basket' of $50 million for Restric… — How does this differ from the Builder Basket?
25. Why might a borrower prefer incurrence covenants over maintenance covenants?
26. Which of these is a common 'event of default' for a PIK toggle note?
27. Which party is responsible for monitoring compliance with covenants on behalf of all bondholders?
28. What is the purpose of a 'Negative Pledge' covenant?
29. In a 'Standardized' credit default swap (CDS), if the fair spread is 150 bps but the standardized coupon is 10
30. In fundamental credit analysis, how is the Interest Coverage Ratio typically calculated?