hard · Private Credit & Debt 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
Sign up free to see the explanation and track your rank →
More Private Credit & Debt loan-structures-instruments practice
- What is the blended interest rate paid by the borrower?
- What is the blended interest rate margin the borrower pays on the total facility?
- A private credit fund is evaluating a 'Unitranche' loan for… — What is the borrower's expe
- A fund manager is valuing a senior loan to a private mid-mar… — Under ASC 820, how is this
- Which group is the fulcrum?
- What is the indicative margin for the 'last-out' lender?
- What is the primary risk factor the lender evaluates?
- If the company fails and liquidates for $2M after two years, what was the primary risk rea