Secured Debt
Mezzanine Debt
Venture Debt
Event & Relative Value & ABL
Others
100

What is the size of a middle market corporation?

$10m - $1bn 

100

What is Mezzanine Debt?

Refers to a tier in a company’s capital structure that sits between secured debt and equity.

100

what is venture debt?

any form of debt extended to a start-up company backed by venture capital investment

100

What is the time horizon on non control (trading strategies)

tends to be short- sometimes only weeks

100

What is one of the biggest risks facing the strategies covered in this module?

Credit Risk

200

What is another term for direct lending and what does it mean? 

Senior lending- when companies borrow directly from institutional investors, typically in the form of senior or secured loans. 

200

What % of the capital structure is usually mezz debt? 

5-10%

200

When does a company typically get venture debt?

After they have received VC financing

200

What are the costs associated with shorting a bond? 

Coupon Payments & Borrowing costs

200

What is a tranching?

An important feature of structured credit is its ability to offer investors claims to the same basket of underlying collateral, but with different risk and return profiles that suit their objectives

300

What is the difference between sponsored and non-sponsored deals? 

Sponsor refers to a private equity firm with a significant equity stake in the underlying company vs Non-sponsored loan occurs when lending to a company with no private equity firm backing it. Instead, the lender and the company interact directly

300

What kind of securitization is mezzanine debt

unsecured 

300

what is the typical return on venture debt? What/ if anything allows for further upside?

 target a 12–18% IRR for each transaction- warrants

300

What are the two categories for asset based loans?

Real Assets 

Balance Sheet Assets

300

What is microfinancing? 

which is the act of lending to small businesses and segments of society that rely on alternative financial services to banks

400
What type of rate is typical on a direct loan? 

Most direct loans are floating-rate loans and are secured debt in a company’s capital structure, meaning they are backed by collateral pledged by the borrower.

400

What is recapitalization? 

recapitalization is the process of restructuring the company’s capital structure, involving the retirement and exchange of existing securities for new ones. In addition, the mezzanine debt may be paid prior to maturity if the borrowing firm is acquired or recapitalized.

400

What can venture debt be used for?

venture debt funding could be used to hire more personnel, spend on marketing initiatives, or invest in research and development

400

What are the 3 categories of distressed debt?

Non Control (Trading Strategies), 

• Non Control (Active Strategies), 

• and Control (Investing Strategies),

400

What is the Risk Based approach ?

A risk-based approach focuses on the underlying drivers of each strategy’s risk and return and builds the allocation from a total portfolio perspective. 

500

what are direct lending return expectations driven by? and what are the expected returns?

starting interest rates, strategy leverage, and defaults and recovery rates. expected returns typically fall between 5 and 10%

500

What are 3 of the 6 common uses of Mezz debt?

1. Management Buyouts 

2. Growth and expansion.

3. Acquisition

4. Company recapitalization

5. Bridge financing 

6. LBO's

500

What is the loss rate on Venture debt?

Around 3%

500

What are the advantages to borrowers AND lenders in ABLs

borrower’s perspective, they provide: • Quick and easy ways to borrow money, • Fewer covenants given the bespoke drafting of terms, • Lower interest rates relative to unsecured debt, due to the loan being backed by collateral.

lender’s perspective, they provide: • Attractive yield relative to public bonds • Exposure to diverse lending opportunities • An extra layer of bankruptcy protection due to the loan being backed by collateral.

500

What are 4 reasons to invest in a structured credit note? 

1. Diversification

2. Matching Risk & Return

3. Matching time horizons

4. Illiquidity