Leveraged Finance Guide (LevFin)
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Senior Debt vs. Subordinated Debt | What is the Difference?
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Corporate Bonds Primer
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Debt Capital Markets (DCM) | Investment Banking Product Group
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Bond Yield Calculator | Excel Training Tutorial
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PIK Interest | "Interest on Interest"
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All Capital Markets Content
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5 Cs of Credit
5 Cs of CreditWhat are the 5 Cs of Credit? The 5 Cs of Credit – Character, Capacity, Capital, Collateral and Conditions – is a risk analysis system used by lenders, such as banks and institutional lenders, to deter...
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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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Annual Percentage Rate (APR)
Annual Percentage Rate (APR)What is APR? The Annual Percentage Rate (APR) is the interest rate charged by a lender on a yearly basis, expressed in the form of a percentage.
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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. Bonds
Bank Debt vs. 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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Bond Yield
Bond YieldWhat is Bond Yield? The Bond Yield is the rate of return expected to be received by a bondholder from the date of original issuance until maturity.
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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, “lump sum” 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 called 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
Corporate BankingWhat is Corporate Banking? Corporate Banking is a division of a bank responsible for putting together loans to corporations, financial institutions, and governments. Corporate banking, or “insti...
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Corporate Banking Financing
Corporate Banking FinancingCorporate Banking: 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 t...
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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 “cov-lite” 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, Moody’s, Fitch) on the risks of a company defaulting on its financial obligat...
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Current Yield
Current YieldWhat is Current Yield? The Current Yield measures the expected annual return of a bond and is calculated by dividing the annual coupon by the current market price.
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Debt Capacity
Debt CapacityWhat is Debt Capacity? Debt Capacity is 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 advises corporations and government entities, such as sovereigns and supranationals, on raising capital via investment-grade...
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Debt Covenants
Debt CovenantsWhat are Debt Covenants? Covenants are conditional terms in lending agreements to ensure the borrower’s financial performance remains steady and management continues to be responsible when making corp...
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Debt Refinancing
Debt RefinancingWhat is Debt Refinancing? Debt Refinancing is the replacement of an existing debt obligation with a new issuance, typically to take advantage of more favorable lending terms.
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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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High Yield Bonds
High Yield BondsWhat are High Yield Bonds? High Yield Bonds, or “junk bonds”, 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 (“LevFin”) group works w...
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Lien
LienWhat is a Lien? A Lien 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 “munis”) 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 bank’s total interest income and the interest expense incurred.
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Preferred Stock
Preferred StockWhat is Preferred Stock? Preferred Stock is a hybrid form of financing representing ownership in a company, combining features of debt and common stock.
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Prepayment Risk
Prepayment RiskWhat is Prepayment Risk? Prepayment Risk refers to the risk of a borrower repaying a loan partially or in-full prior to the original maturity date stated in the lending agreement.
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Putable Bond
Putable BondWhat is Puttable Bond? A Puttable Bond is a debt instrument structured with an embedded put option. The put option feature offers the bondholder the right, but not the obligation, to force an early re...
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Reinvestment Risk
Reinvestment RiskWhat is Reinvestment Risk? Reinvestment Risk is the potential risk where future proceeds, such as the coupon payments or debt principal, will need to be reinvested at a lower interest rate compared to...
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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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Secured Overnight Financing Rate (SOFR)
Secured Overnight Financing Rate (SOFR)What is SOFR? The 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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Senior Debt
Senior DebtWhat is Senior Debt? Senior Debt 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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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 – as implied by the name – is “...
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Surety Bond
Surety BondWhat are Surety Bonds? A Surety Bond is 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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Yield to Call (YTC)
Yield to Call (YTC)What is Yield to Call? Yield to Call (YTC) is the expected return on a callable bond, assuming the bondholder redeemed the bond on the earliest call date before maturity.
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Yield to Maturity (YTM)
Yield to Maturity (YTM)What is Yield to Maturity? The Yield to Maturity (YTM) represents the expected annual rate of return earned on a bond under the assumption that the debt security is held until maturity. From the persp...
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Yield to Worst (YTW)
Yield to Worst (YTW)What is Yield to Worst? Yield to Worst (YTW) is the minimum return received on a callable bond, i.e. the “floor yield”, aside from the yield if the issuer were to default.
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Zero-Coupon Bond
Zero-Coupon BondWhat is a Zero Coupon Bond? A Zero Coupon Bond is priced at a discount to its face (par) value with no periodic interest payments from the date of issuance until maturity.