17 questions reported in Oaktree Capital Management interviews, organised by the group that asks them. Every question carries a model answer and graded feedback on your own attempt.
Questions
Easy · Medium
Hard
Model builds
Built in the spreadsheet grid
Blended return construction, PIK, warrants and intercreditor terms. 9 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 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?
A foundational question on why junior capital can lose money even when enterprise value looks healthy.
A company has $300m of senior debt, $100m of mezzanine debt and $200m of sponsor equity. Enterprise value falls to $360m. What happens?
Private credit firms ask this because junior debt labels are often used sloppily.
Compare mezzanine debt with second lien debt. Which one is safer and why?
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…
A senior analyst case on protecting junior recovery when a sponsor requests consent for a transaction that pays itself rather than strengthens the company.
You own a $75m mezzanine note behind $225m of first-lien debt. EBITDA is $60m and enterprise value is $420m. The sponsor requests consent for a $50m incremental first-lien dividend recap. It says pro…
A harder credit question that forces candidates to quantify attachment and detachment risk.
A business has $250m first-lien debt, $75m mezzanine debt and $175m equity. In distress, enterprise value is $285m. What is the mezzanine loss given default?
Recovery analysis, capital structure relative value and covenant leakage. 7 questions
Asked to ensure candidates do not quote yield without thinking about price and recovery.
A distressed bond trades at 60 and yields 18%. Why might the yield be misleading?
A first-round credit hedge fund question before moving into a specific pitch.
What makes a good credit investment thesis different from a good equity thesis?
Credit hedge fund interviews use this to test whether a candidate recognises that creditor downside depends on documents as well as EBITDA.
A borrower has stable EBITDA and adequate liquidity, but its bond indenture permits large dividends to the sponsor. Why should a credit investor care, and what would you review before buying the bond?
A fallen-angel scenario that tests technicals and fundamentals together.
An investment-grade issuer is downgraded to high yield. How do you analyse the trade?
A quantitative recovery question for credit hedge fund interviews.
A company has $200m secured debt and $300m senior unsecured notes. Reorganisation value is $350m before fees. Estimate unsecured recovery.
An offer-ready relative-value case for a credit hedge fund analyst seat.
A company has a 2027 secured note at 88 with a 10% coupon and a 2030 secured note at 82 with an 8% coupon. You expect the company to refinance its 2027 maturity within six months, but you are…
A modern credit question on why documentation can dominate enterprise value.
What is liability management risk and how does it affect a credit hedge fund investment?
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 Oaktree Capital Management.