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All Leveraged Finance (LevFin) Content
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5 Cs of Credit
5 Cs of CreditWhat are the 5 Cs of Credit? The 5 Cs of Credit is a risk analysis system used by lenders, such as banks and institutional lenders, to determine the creditworthiness of borrowers. Each factor contribu...
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Accrued Interest
Accrued InterestWhat is Accrued Interest? Accrued Interest represents an unfulfilled interest expense amount still owed by a borrower to a lender as of a particular date.
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Asset Backed Securities (ABS)
Asset Backed Securities (ABS)What is ABS? Asset Backed Securities (ABS) are financial instruments collateralized by an underlying set of liquid, financial assets pledged as part of the lending arrangement.
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Bank Debt vs. Corporate Bonds
Bank Debt vs. Corporate BondsWhat is Bank Debt? Bank Debt is the most common form of corporate debt, which at the most basic level is conceptually the same as any other loan or credit product from a local retail bank (but just do...
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Bridge Loan
Bridge LoanWhat is Bridge Loan? Bridge Loans represent a source of short-term financing until the borrower ā either a person or corporation ā secures long-term financing or removes the credit facility altogether...
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Bullet Loan
Bullet LoanWhat is a Bullet Loan? For a Bullet Loan, the entire principal of the debt obligation is repaid in a single, ālump sumā payment on the date of maturity.
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Collateralization
CollateralizationWhat is Collateralization? Collateralization describes the process in which a loan agreement is secured by a borrower from pledging an asset as collateral. In the event that the borrower defaults, i.e...
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Commercial Banking and Retail Brokerage
Commercial Banking and Retail BrokerageFrom 1932 until 1999 there was a law calledĀ The Glass-Steagall Act, which said that commercial banks can lend money, extend lines of credit, and open checking and savings accounts, while investment ba...
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Commitment Fee
Commitment FeeWhat is Commitment Fee? The Commitment Fee is a fee charged by lenders to borrowers on the unused portion (i.e. the undrawn portion) of a line of credit facility.
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Convertible Bonds
Convertible BondsWhat are Convertible Bonds? Convertible Bonds are fixed-income issuances structured with a conversion option to exchange them for a certain number of shares (i.e. equity) in the underlying company.
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Corporate Banking Financing
Corporate Banking FinancingCorporate Bank: Financing Products The corporate bank falls within the investment banking division of financial institutions that have a balance sheet (meaning they make their own loans). Next we turn...
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Coupon Rate
Coupon RateWhat is Coupon Rate? The Coupon Rate is multiplied by the par value of a bond to determine the annual coupon payment owed by the issuer to a bondholder until maturity.
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Covenant-Lite Loans
Covenant-Lite LoansWhat are Covenant-Lite Loans? Covenant-Lite Loans, or ācov-liteā for short, are debt financing arrangements in which there are fewer restrictions placed on the borrower and less lender protection as a...
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Credit Rating
Credit RatingWhat is a Credit Rating? Credit Ratings are scoring reports published by independent credit agencies (e.g. S&P Global, Moodyās, Fitch) on the risks of a company defaulting on its financial obligat...
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Debt Capacity
Debt CapacityWhat is Debt Capacity? Debt Capacity is defined as the maximum amount of leverage that a company could afford to incur, determined by its free cash flow (FCF) profile and market positioning.
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Debt Capital Markets (DCM)
Debt Capital Markets (DCM)What is Debt Capital Markets? The Debt Capital Markets (DCM) product group of an investment bank advises corporations and government entities, such as sovereigns and supranationals, on raising capital...
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Debt Covenants
Debt CovenantsWhat are Debt Covenants? Debt Covenants are conditional terms in lending agreements to ensure the borrowerās financial performance remains steady and management continues to be responsible when making...
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Debt Refinancing
Debt RefinancingWhat is Debt Refinancing? Debt Refinancing refers to the replacement of an existing debt obligation with a new issuance, typically to take advantage of more favorable lending terms.
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Efficiency Ratio
Efficiency RatioWhat is the Efficiency Ratio? TheĀ Efficiency Ratio is a risk measure used to evaluate the cost-efficiency and profitability of a bank. The operating efficiency of a bank represents its ability to gene...
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FIG Interview Questions
FIG Interview QuestionsWhat are the Common FIG Interview Questions? In this FIG Interview Questions post, we’ll provide the top ten most common interview questions asked during FIG investment banking interviews.
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Fixed Interest Rate
Fixed Interest RateWhat is Fixed Interest Rate? A Fixed Interest Rate remains constant for the entirety of the loan agreement, as opposed to being tied to a prime rate or underlying index.
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Floating Interest Rate
Floating Interest RateWhat is a Floating Interest Rate? A Floating Interest Rate refers to when the pricing on debt is variable and fluctuates over the borrowing term due to the interest rate being tied to an underlying in...
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Growing Perpetuity
Growing PerpetuityWhat is Growing Perpetuity? A Growing Perpetuity is a series of future cash flows expected to grow indefinitely at a constant rate.
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High Yield Bonds
High Yield BondsWhat are High Yield Bonds? High Yield Bonds, or ājunk bondsā, are corporate debt issuances with sub-investment grade credit ratings. Generally, high yield bonds are unsecured debt instruments with gre...
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Lending Ratios for Banks
Lending Ratios for Banks[caption id="attachment_45744" align="alignright" width="300"] ROA (description below) is used to calculate the profitability of a potential loan.[/caption] Corporate Banking: Loans and Credit Facilit...
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Leveraged Finance Guide (LevFin)
Leveraged Finance Guide (LevFin)What is Leveraged Finance? Leveraged Finance (LevFin) refers to the financing of highly levered, speculative-grade companies. Within the investment bank, the Leveraged Finance (āLevFinā) group works w...
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Lien
LienWhat is a Lien? AĀ LienĀ is defined as a claim on the collateral pledged by a borrower to secure a form of debt financing such as a corporate loan or mortgage.
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Loss Given Default (LGD)
Loss Given Default (LGD)What is Loss Given Default? The Loss Given Default (LGD) is the estimated loss incurred by a lender if a borrower defaults on a financial obligation, expressed as a percentage of the total capital at...
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Mezzanine Financing
Mezzanine FinancingWhat is Mezzanine Financing? Mezzanine Financing is an alternative form of hybrid financing that blends features of debt and equity. Common examples include 2nd lien debt, senior/subordinated bonds, a...
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Municipal Bonds
Municipal BondsWhat are Municipal Bonds? Municipal Bonds (or āmunisā) are debt issuances by city, county, and state government entities to fund capital projects such as universities, hospitals, and infrastructure (e...
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Net Interest Income (NII)
Net Interest Income (NII)What is Net Interest Income? Net Interest Income (NII) is a profit metric equal to the difference between a bankās total interest income and the interest expense incurred.
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Revolving Credit Facility
Revolving Credit FacilityWhat is Revolving Credit Facility? The Revolving Credit Facility (“Revolver”) refers to a common loan that acts like a credit card for large companies and, along with Term Loans, is a core...
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Seller Financing
Seller FinancingWhat is Seller Financing? Seller Financing, or a āseller noteā, is a method for buyers to fund the acquisition of a business by negotiating with the seller to arrange a form of financing.
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Senior Debt
Senior DebtWhat is Senior Debt? Senior DebtĀ is a financing arrangement that represents the highest claim on the borrower with the lowest downside risk to the lender. As part of the terms of such a financing arra...
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SOFR
SOFRWhat is SOFR? TheĀ Secured Overnight Financing Rate (SOFR) is the benchmark rate derived from transactions observed in the Treasury “repo” market and is anticipated to replace LIBOR by mid-...
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Subordinated Debt
Subordinated DebtWhat is Subordinated Debt? Subordinated Debt represents the debt tranches lower in priority compared to the 1st lien, senior secured debt instruments. Subordinated debt ā as implied by the name ā is ā...
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Surety Bond
Surety BondWhat are Surety Bonds? A Surety BondĀ isĀ a contract among a minimum of three parties where if the principal defaults or fails to perform an obligation, a surety is obligated to fulfill a duty such as p...
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Syndicated Loan
Syndicated LoanWhat is a Syndicated Loan? A Syndicated Loan is a credit facility or fixed loan amount offered by a pool of lenders, which are collectively referred to as syndicates.
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Ultimate Guide to Corporate Banking
Ultimate Guide to Corporate BankingWhat is Corporate Banking? Corporate banking (also called institutional banking) is a division in a bank responsible for putting together loans to corporations, financial institutions, and governments...