13 questions reported in HPS Investment Partners interviews, organised by the group that asks them. Every question carries a model answer and graded feedback on your own attempt.
Questions
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Model builds
Built in the spreadsheet grid
Blended return construction, PIK, warrants and intercreditor terms. 10 questions
Junior credit interviews use this to test whether you understand return and liquidity are different things.
A mezzanine note pays 8% cash interest and 4% PIK. Explain the difference and what each does to risk.
A process question for junior private credit analysts.
Walk me through the basic diligence you would do before committing to a mezzanine investment.
A first-round junior-capital question that tests whether a candidate can read a group structure rather than only a debt schedule.
Explain structural subordination. Why can a mezzanine note issued by a holding company be riskier than its stated ranking suggests?
Junior lenders ask this because their recovery can depend on sponsor behaviour before formal default.
You are lending behind senior debt in a sponsor-owned company. How do you assess whether the sponsor will support the credit if performance weakens?
A deal-team workflow question for analysts expected to turn an approved junior-capital commitment into a protected funded position.
Your investment committee approves a mezzanine commitment for a sponsor acquisition. Walk through the closing work you would complete between approval and funding.
A simple math question to test whether candidates can separate cash yield, PIK and exit value.
A $100m mezzanine note pays 8% cash and 4% PIK for five years, with no warrants. Roughly what is the total value received at exit before fees?
Asked when a deal model assumes takeout debt without proving market access.
A mezzanine investment underwrites repayment through a refinancing in year five. What do you worry about?
Asked once candidates can explain subordination but not the legal mechanics behind it.
You are buying mezzanine debt behind a senior secured loan. What intercreditor terms do you care about most?
A judgement scenario on whether flexibility is credit support or lender give-up.
A borrower asks to toggle its 10% cash-pay mezzanine coupon to PIK for the next two years. How do you respond?
A stressed-credit committee scenario on whether new liquidity preserves or transfers value away from a junior lender.
You own a $75m second-lien mezzanine note behind $250m of first-lien debt. The borrower has $8m of liquidity and needs $35m of working capital to reach its seasonal peak. First-lien lenders propose a…
Leverage capacity, documentation, downside cases and portfolio construction. 2 questions
A direct-lending underwriting case testing liquidity sequencing, collateral quality and lender protections.
You are the underwriting associate on a unitranche loan to a distributor. The company misses plan after close and requests an amendment. Evaluate each update and prepare a credit-committee…
A direct-lending analyst screening a sponsor-backed unitranche before credit committee.
You are reviewing a sponsor's data room for a $240m unitranche to finance a healthcare-services acquisition. Work through the materials as they arrive, make the required decisions, and write the…
Structuring for downside, collateral, priming risk and recovery. 1 question
A distressed-credit case that tests whether a lender can choose a remedy based on value preservation rather than frustration.
A borrower will breach its leverage covenant next quarter. It has adequate liquidity for six months, a viable core business, and a sponsor proposing a 12-month maturity extension in exchange for a…
Write your answer, get it graded on technical accuracy, completeness and communication, and see exactly which mechanic you missed.
Company tags reflect where a question type is commonly reported in interviews. They are not sourced from, endorsed by, or affiliated with HPS Investment Partners.