Private Credit
Prepalyst has 21 mezzanine & junior capital interview questions with model answers, covering blended return construction, pik, warrants and intercreditor terms. Every question is graded on technical accuracy, completeness and interview communication. Practice is free.
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.
Mezzanine teams use this arithmetic to check whether reported leverage captures debt that is compounding rather than being paid in cash.
A borrower has $180m of first-lien debt and a $60m mezzanine note with a 10% annual PIK coupon. EBITDA is $40m and does not change. What are total debt and total leverage after one year, assuming no repayments or other…
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 first-round private credit question to separate senior lenders from junior-capital thinkers.
Define mezzanine debt. Where does it sit in the capital structure and why would a sponsor use it?
Asked when a candidate knows the coupon but not the equity kicker.
Why might a mezzanine lender ask for warrants instead of simply charging a higher coupon?
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?
Tests whether candidates know how junior lenders monitor risk without controlling the company day to day.
What covenants would you want in a mezzanine investment and why?
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?
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?
Junior capital providers choose between these regularly, and the reasons are not obvious.
A sponsor needs $150m of junior capital. When would you provide it as mezzanine debt versus preferred equity?
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 $40m super-senior…
Junior capital interviews test whether you can build a blended return across instruments.
Structure a $100m mezzanine investment targeting a 15% IRR over a five-year hold. The borrower can afford 8% cash interest. How do you get there?
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 forma EBITDA will be…
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?
A junior-capital underwriting question that distinguishes a contractual covenant cure from a durable reduction in default risk.
A sponsor-owned borrower will fail its springing fixed-charge coverage test. The credit agreement allows an equity cure, and the sponsor proposes to inject $12m two days before testing. The agreement lets the company add…
Write your answer, get it graded on technical accuracy, completeness and communication, and see exactly which mechanic you missed.
Firm names indicate where a question type is commonly reported in interviews. They are not sourced from, endorsed by, or affiliated with the firms named.