Private Credit
86 credit analysis questions of the kind asked in private credit interviews. Each carries a model answer, the concepts a complete response must hit, and graded feedback on your own attempt.
A screening calculation used before any deeper credit discussion.
A borrower has $60m of debt, $10m of cash and $12m of EBITDA. Calculate gross and net leverage. Why might both figures mislead a lender?
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.
Levfin desks ask this because leverage depends on adjusted EBITDA, not just reported EBITDA.
What are EBITDA addbacks, and why do lenders care so much about them?
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?
Treasury teams support contracts where counterparties want payment assurance without an immediate cash deposit.
Explain the difference between a letter of credit and a bank guarantee. Why might a supplier ask for one, and what should treasury check before issuing it?
A standard product comparison in leveraged finance interviews.
Compare a leveraged loan with a high-yield bond.
Treasury teams must protect operating cash and derivative collateral from a bank failure.
Your company holds substantial deposits and derivatives with several banks. How would you manage bank counterparty risk?
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?
Event-driven funds test whether candidates can translate enterprise value into class-specific recovery before discussing a distressed catalyst.
A bankrupt company is worth $180m after restructuring costs. It has a $40m revolver, $100m first-lien term loan and $80m unsecured notes. Ignoring interest and fees, calculate each class's recovery and explain why the…
A first-round question on real estate loan structure and sponsor alignment.
What is the difference between recourse and non-recourse real estate debt?
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 question testing whether a candidate can read a basic term sheet.
A lender offers a borrower a five-year $100m first-lien term loan at SOFR + 600bp. Explain the main economics and protections in plain English.
A common first-round question for a manager who invests across government and corporate bonds.
A five-year corporate bond yields 5.2% and a five-year Treasury yields 4.4%. What is the 80bp spread compensating an investor for?
A foundational credit-trading question checks that a candidate can explain a spread as more than a default forecast.
Two five-year corporate bonds have the same Treasury benchmark, but Company A trades at Treasury + 120bp and Company B at Treasury + 260bp. What does the 140bp difference mean, and what would you investigate before…
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?
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?
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?
Funds ask this after a company-level credit view to test instrument selection.
You like a company's credit. How do you decide whether to buy the loan, bond, CDS, or equity?
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?
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 first-round real estate credit question on what protects a senior lender.
Explain why senior mortgage debt ranks ahead of mezzanine debt and equity. What does that priority mean in a downside?
This is a foundational recovery question in credit sales, trading and research interviews.
A company has a first-lien loan, unsecured bonds, and common equity. Rank them in a restructuring and explain why the ranking matters even when the company is current on interest.
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?
A maturity-risk case central to bridge and transitional lending.
A bridge loan matures in two years. How do you assess whether it can be refinanced?
A distinct discipline from cash flow lending, and common in retail and distribution credits.
How does asset-based lending differ from cash flow lending? Construct a borrowing base for a distributor with $200m of receivables and $150m of inventory.
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 key documentation concept in the institutional loan market.
What does covenant-lite mean, and why do investors accept it?
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?
Credit-risk teams use this to test whether candidates look beyond default as the only adverse outcome.
Why does a corporate bond investor care about credit migration if the issuer never defaults? Walk through the risk of a BBB bond being downgraded to BB.
A common follow-up to leverage sizing.
A company has $100m EBITDA and $500m debt priced at 10% cash interest. What is interest coverage, and is it comfortable?
Tests whether candidates treat a maintenance covenant as an early-warning tool rather than a number to maximise.
A company has $50m of net debt, a 5.5x maximum net-leverage covenant and $12m of EBITDA. It expects EBITDA to fall 15%. Is it in breach, and what would you investigate before agreeing to a waiver?
Tests whether candidates know how lenders protect a loan after closing.
What covenants would you include in a transitional real estate loan, and why?
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?
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 relative-value interview question for a credit fund that trades both cash bonds and CDS.
An issuer's one-year CDS trades at 1,200bp while five-year CDS trades at 750bp. What is the market signalling, and how would you decide whether to buy near-term protection, sell it, or express the view in cash bonds?
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?
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.
A scenario question that tests liquidity judgement under a deteriorating market backdrop.
Your company has $150m of cash and a $500m undrawn revolver. Debt markets are becoming volatile, but you have no immediate maturity. Should you draw the revolver now?
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?
Credit traders are expected to translate company news into debt-service and spread implications quickly.
A high-yield issuer reports EBITDA 15% below expectations after losing a major customer. The stock falls 25%, but its bonds are down only 2 points. How do you decide whether to sell, hold, or buy the bonds?
A claim-selection case used by credit funds to test whether an analyst maps who actually owns assets and cash flow.
A parent holding company has a $300m bond. Its operating subsidiary owns all assets, generates $80m of EBITDA, and has $400m of secured debt. The holdco owns only the subsidiary's equity. Explain why the holdco bond is…
A core analyst question for a credit research rotation within a fixed-income manager.
You are considering a five-year bond issued by an investment-grade company. What would you analyse before buying it?
A lender judgement question that goes beyond property-level metrics.
What do you assess when underwriting a real estate sponsor?
Direct lending interviews start with why private credit won share from banks.
Why would a sponsor choose a unitranche from a private credit fund over a broadly syndicated loan from a bank, when the unitranche is more expensive?
A portfolio-management scenario for a lender monitoring a transitional office loan.
A floating-rate office loan has a 1.24x trailing DSCR against a 1.25x springing cash-management trigger. The borrower has made every payment, but a tenant representing 18% of rent expires in six months. What do you…
Credit spreads are the core pricing metric. This tests understanding of credit risk.
What factors determine credit spreads for corporate bonds, and how do you assess whether current spreads are appropriate?
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?
The situation every private credit portfolio faces, and where returns are actually determined.
A portfolio company breaches its leverage covenant. The sponsor asks for an amendment. How do you respond?
A leveraged-finance analyst must turn scattered sponsor and lender comments into an actionable underwriting response before syndication.
At 6:45am, the lead underwriter asks for a response before the financing launch call. The sponsor wants leverage unchanged despite weaker trading. Prioritise each reply and prepare a concise recommendation to the deal…
The analysis a credit committee actually decides on.
How do you construct a downside case for a credit investment? What does it have to survive?
Credit hedge fund interviews test whether you can think across the whole structure.
A company's bonds trade at 70 cents while the equity still has a $2bn market cap. Is there a trade? Walk me through the analysis.
A credit-committee scenario requiring an explicit recommendation, not a list of factors.
Choose one loan. Loan A pays SOFR + 700bp, is second lien at 5.0x total leverage, and has 1.5x EBITDA of equity cushion. Loan B pays SOFR + 525bp, is first lien at 4.0x total leverage, and has 3.0x EBITDA of equity…
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 direct-lending credit-agreement review where a lender must connect covenant arithmetic to the provisions that can erode it.
You are the underwriting associate reviewing a sponsor-backed unitranche amendment. Calculate headroom using lender-defined EBITDA, test the proposed add-on, identify the document leakage, and prepare the approval markup…
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 recommendation.
Credit funds test whether you can compare instruments rather than just analyse a company.
A company's secured bonds yield 8% and its unsecured bonds yield 14%. Is the unsecured cheap? Walk me through the analysis.
The second major allocation decision in a multi-sector bond mandate.
Investment grade spreads are at 90bp, near historic tights. Do you underweight credit? Walk me through the decision.
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…
Relative-value credit interviews test whether candidates can combine documents, recovery analysis and market pricing into a trade.
A company's first-lien term loan trades at 92 and its unsecured bond trades at 78. Both mature in three years. Under a downside case, you estimate enterprise value of 85 for every 100 of first-lien debt outstanding, with…
A credit-agreement lab combining covenant arithmetic, document leakage and practical markups.
You are reviewing the first credit-agreement draft for a sponsor-backed borrower. Calculate covenant headroom, find the provisions that can move value away, and send the essential markup.
CLOs buy roughly two thirds of the leveraged loan market. Desks need to understand their behaviour.
Explain a CLO. Where does the equity return come from, and what happens when the portfolio deteriorates?
The question a leveraged finance desk answers before committing capital.
A sponsor asks you to underwrite the debt for a buyout of a business with $150m EBITDA. How do you determine how much debt it can carry, and what would make you say no?
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?
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?
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?
Asked to test whether you understand where a leveraged finance desk actually loses money.
What is market flex, and what happens to the bank if a committed financing cannot be syndicated?
A workout judgement case for real estate debt asset-management teams.
What would make you transfer a real estate loan to watchlist, and what happens next?
A leveraged-finance analyst review before an underwriting committee discussion.
A first-year analyst has prepared the debt-sizing case for a sponsor acquisition of a packaging distributor. Find the errors that change debt capacity or returns, protect the underwriting timeline, and draft the note you…
A direct-lending associate review of a liquidity model and draft credit approval memorandum.
You are reviewing a unitranche underwriting for a healthcare-services company one hour before credit committee. Find the material flaws in the liquidity case, decide what the team must repair, and prepare a concise…
A direct-lending scenario lab testing leverage capacity, interest coverage and underwriting discipline for a sponsor add-on.
A sponsor requests incremental unitranche debt to fund an add-on. Calculate the headroom, test the pro forma interest burden, and decide whether the lender should fund the request as proposed.
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?
Private credit interviews go deep on documentation, because that is where the risk lives.
Beyond the leverage covenant, which credit agreement terms do you negotiate hardest, and why?
A leveraged-finance underwriting case where sponsor-friendly documentation changes the lender's exit protection.
A sponsor asks for debt that can remain outstanding after a change of control if leverage is below a portability threshold. What must the underwriting team test before accepting the request?
A direct-lending data-room exercise built around EBITDA quality, liquidity and documentation.
You have 45 minutes before the screening committee for a $275m unitranche. Review the extracts, choose the next diligence action, and draft a credit recommendation.
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 credit-committee…
A real-estate-debt scenario lab testing debt yield, stressed DSCR and refinance sizing under a rising-rate maturity wall.
A floating-rate multifamily loan matures next year. Calculate the lender's current income protection, stress the debt service, and quantify the refinance gap before recommending a modification or capital solution.
A senior event-driven credit discussion testing whether you can analyse a liability-management transaction from both tendering and holdout perspectives.
An issuer offers unsecured bondholders $70 of new secured notes for every $100 principal tendered. If at least 90% tender, non-tendering bonds will be structurally subordinated and you estimate their recovery at $25; if…
The core analytical exercise of a private credit investment team.
You're underwriting a $300m unitranche to a sponsor-backed software business at 6.0x leverage. What is your analysis, and what protections do you negotiate?
A sponsor asks the bank to finance a dividend recap eighteen months after closing.
A sponsor-owned company has reduced debt from $600m to $480m while EBITDA rose from $100m to $120m. The sponsor wants $180m of new debt to fund a dividend. Would you recommend underwriting it?
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…
A real estate debt investment-committee case on whether time creates recovery value or merely delays loss.
A $90m bridge loan matures today. A consensual 12-month extension requires a $5m sponsor paydown and is expected to produce $92m of net recovery next year. Immediate enforcement is expected to produce $82m net in six…
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…
A senior technical question on competing creditor rights in a distressed capital structure.
Why does the intercreditor agreement matter in a restructuring?
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.