CTP Capital Markets & Financing Alternatives Flashcards
6 cards from real CTP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 CTP Capital Markets & Financing Alternatives flashcards as text
A company executes an 'out-of-court exchange offer.' What is occurring?
Answer: The company offers existing bondholders new securities at modified terms to reduce debt without filing bankruptcy
An exchange offer is a voluntary, out-of-court mechanism to reduce or modify debt by swapping old securities for new ones with different terms, avoiding the cost and delay of bankruptcy.
In a distressed situation, what is a 'pre-packaged bankruptcy'?
Answer: A Chapter 11 filing where the debtor has obtained creditor votes on the reorganization plan before filing
A prepackaged bankruptcy pre-negotiates and votes on the reorganization plan before filing, dramatically compressing the time and cost of the court process.
What distinguishes a 'term loan B' (TLB) from a traditional bank term loan in leveraged finance?
Answer: TLBs are held by institutional investors, have minimal amortization, and trade in secondary markets, making them common in highly leveraged structures
Term Loan B structures are designed for institutional lenders like CLOs and hedge funds, with bullet-like repayment profiles that make them flexible for leveraged transactions.
What is the role of a 'backstop party' in a rights offering?
Answer: A party that commits to purchase any unsubscribed shares, guaranteeing the capital raise closes
The backstop party assumes the underwriting risk of the rights offering, ensuring the reorganized company raises the full targeted capital even if other stakeholders don't exercise their rights.
Which metric do lenders most commonly use to size debt capacity for a distressed borrower seeking exit financing?
Answer: Total debt / EBITDA (leverage ratio), typically benchmarked against comparable restructured companies
Leverage ratios set the ceiling on how much debt the reorganized company can support relative to its projected cash earnings, forming the basis of exit financing sizing.
What is a 'last-out' tranche in an ABL facility?
Answer: A portion of the revolving credit that bears higher interest and is the last to be repaid, often used to provide additional liquidity in distressed deals
Last-out tranches allow distressed borrowers to access more liquidity from their ABL than the standard borrowing base supports, with that extra tranche repaid after the rest of the facility.