Front Office Investing interview prep.

Behavioural questions to expect

1. Walk me through your CV.
2. Tell me about your most impressive distressed or structured-financing analysis.
3. Tell me about a weakness, a failure, or feedback you've received and worked on.
4. Why special situations / distressed private credit? Why not direct lending or distressed trading?
5. Why the firm?
6. Why be a capital provider into stress rather than trade distressed paper — what's the trade-off?
7. How would you describe the firm's special-situations approach and edge in your own words?
8. How would the firm use — or defend against — liability-management moves?

Technical concepts to master

• The special-situations landscape

  Rescue / bridge financing · Liability management · Structured preferred / equity · Asset-based / collateral solutions · Distressed-for-control

• Structuring a rescue financing

  Priority / super-priority · OID + coupon + fees · Penny warrants · Protections + governance

• Liability management — offense + defense

  Priming / super-priority new money · Drop-down · Uptier exchange · Defense

• Capital structure priority + recovery + fulcrum security

  The waterfall — senior to junior · Recovery rates — directional norms · Fulcrum security · Going-concern vs liquidation EV · Absolute priority rule (APR)

• Returns + downside

  The blended return · Downside / recovery · Illiquidity + process risk · Sizing

Practical drills

• A company has ~3 months of liquidity left and an over-levered balance sheet. Structure the rescue / special-situations financing you'd provide. 5 min prep, 5-7 min delivery. Be ready to be probed on priority, return, and downside.
• You provide $200m of rescue capital at 94 OID (lend at 94 cents), 11% cash coupon, a 2% upfront fee, plus penny warrants for 8% of the equity. Hold ~2 years; at exit the equity is worth $400m and the $200m principal repays at par. Roughly what's the gross IRR?
• A distressed company has a going-concern EV of $900m. Existing structure (par): $400m first-lien, $500m senior unsecured, $200m subordinated, then equity. You're considering providing $150m of super-priority rescue money on top. Run the waterfall: who recovers what, where's the fulcrum, and how does your new money rank?

Smart-question anchors

• Sourcing — where the firm's situations come from (relationships, complexity others avoid, restructurings) and how an analyst contributes
• Structuring + priority — how the firm inserts capital for priority and engineers the return blend
• Liability management + process — the firm's use of (or defense against) drop-downs / uptiers and its restructuring expertise
• Control orientation — passive credit returns vs active loan-to-own, and how the firm staffs the legal / governance work
• Risk + downside discipline — recovery loss budgeting, collateral / priority discipline, sizing for variance

Sourced from

Mergers & Inquisitions — Distressed / Special Situations · Private Equity Bro — Special Situations vs Distressed Debt · Restructuring Interviews / Sell Side Handbook — distressed + special situations · CFA Institute — Private Special Situations · Wall Street Oasis — Distressed / Special Situations threads · Simpson Thacher — Leveraged Finance 101 (covenants / liability management)