hard · Private Credit loan-structures-instruments
An analyst is valuing a 100M senior secured loan for a BDC's quarterly report under ASC 820. The loan was originated atSOFR + 550bps whenSOFRwas1.0%. Currently,SOFRis4.5%, and the company's internal credit rating has deteriorated from '2' to '4' (B-equivalent). Market spreads for B-rated middle market loans are nowSOFR + 800 bps.
If the loan has 3 years remaining with annual interest payments and a bullet repayment, what is the approximate fair value of the loan using the Level 3 discounted cash flow method?
- 93.6% of par
- 100.0% of par
- 87.4% of par
- 95.5% of par
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