Private Credit
Prepalyst has 20 special situations interview questions with model answers, covering structuring for downside, collateral, priming risk and recovery. Every question is graded on technical accuracy, completeness and interview communication. Practice is free.
Common in stressed-credit interviews because it tests how lenders create time without giving away rights.
A borrower will breach a leverage covenant next quarter but needs six months to sell a division. What is the difference between a waiver and a forbearance agreement, and which would you prefer as lender?
A foundational distressed-investing concept used in recovery and control discussions.
What is the fulcrum security in a restructuring, and why do distressed investors care about it?
Tests whether a candidate separates the face amount of a claim from its economic value.
You buy $100m face value of first-lien debt at 65. What does "at 65" mean, and what determines whether the trade is attractive?
A first-round distressed-credit question testing whether a candidate understands why secured creditors can permit a Chapter 11 process without surrendering economic value.
What is adequate protection in Chapter 11, and why does a debtor need to provide it to a secured lender?
A first-round question testing whether a candidate understands the mandate beyond generic private credit.
What does a special situations investor do, and how is the underwriting different from a normal direct loan?
The standard liquidity question in a turnaround or stressed-lending process.
Why do distressed investors focus on a 13-week cash-flow forecast, and what would you challenge in one?
An asset-based lending scenario that distinguishes collateral availability from headline debt capacity.
An ABL facility has $80m outstanding. Eligible receivables are $60m at an 80% advance rate and eligible inventory is $50m at a 50% advance rate. Is there a borrowing-base shortfall, and what do you do?
A distressed-debt trading screen that tests whether a candidate can reconcile a quoted price to the actual cash required to settle a loan purchase.
You buy $20m face value of a loan at a clean price of 72. The loan pays a 6% annual cash coupon, interest accrues on a 360-day basis, and 90 days have passed since the last payment. What cash do you pay at settlement,…
A realistic workflow question when a stressed borrower offers material non-public information to a lender group before an out-of-court restructuring.
You own a meaningful position in a stressed term loan. The company's adviser asks you to join a creditor group and sign an NDA to receive a restructuring proposal. What do you assess before signing, and how would you use…
A second-round documentation question for investors buying junior or structurally complex debt.
You are considering a second-lien loan. What intercreditor provisions can matter more than the stated interest rate?
A practical distressed-credit question on buying bankruptcy claims rather than syndicated loans.
What are the distinctive risks when buying a bankruptcy claim, and why can the purchase price differ from the expected plan recovery?
Tests whether a candidate can translate a liquidity gap into protected new-money terms.
A company needs $40m to fund operations through a turnaround. What terms would you seek if you provide rescue financing?
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 modest fee but no new…
The core quantitative exercise in distressed credit.
A company has $400m first lien, $250m second lien and $300m unsecured notes. Normalised EBITDA is $120m and comparable businesses trade at 5.5x. Calculate recoveries and identify the fulcrum security.
A senior distressed-credit case that combines recovery analysis, process strategy and ownership underwriting.
You own $120m of first-lien debt and the company is being sold in bankruptcy. Explain a credit bid and how you would decide whether to use one.
Special situations and distressed funds compete to provide it.
Why is debtor-in-possession financing attractive to a lender, and why would an existing creditor provide it even at a loss-making rate?
The defining development in leveraged credit over the last decade.
Explain the main liability management exercises. How does a lender end up worse off despite holding senior secured debt?
Tests process judgement in a restructuring where speed and stakeholder consent change value.
Compare a prepackaged Chapter 11 with a free-fall filing. When would you favour each, and what does the choice mean for creditors?
Special situations interviews test structuring creativity against downside protection.
A company needs $150m urgently and cannot access conventional markets. How would you structure the financing, and how do you get comfortable?
A senior special-situations case on valuing a legacy first-lien position after a non-pro-rata transaction has created a new superpriority tranche.
A company has $400m of legacy first-lien debt. A majority group exchanges into $100m of new superpriority debt and provides $25m of cash, leaving non-participating legacy lenders structurally behind it. The excluded loan…
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.