Restructuring & Distressed Interview Questions
Restructuring and distressed questions cover bankruptcy priority, DIP financing, covenant mechanics, and the vocabulary credit and restructuring groups test for.
6 questions
Advanced questions
Superday-level questions with full model answers.
- A company enters Chapter 11 with a $50 million superpriority DIP facility (unsecured), $10 million in other administrative claims, $200 million of pre‑petition first‑lien secured debt (collateral valued at $250 million), and $100 million of general unsecured claims. If the enterprise value is $280 million, compute recoveries for every class and state which class is the fulcrum.Advanced
- A debtor in possession seeks approval of a $120 million DIP facility that will prime the pre‑petition first‑lien lender’s $300 million claim. The first‑lien lender objects, arguing adequate protection is impossible because the collateral is worth only $250 million. What must the debtor demonstrate to obtain the priming lien, and how can it structure the DIP to overcome the objection?Elite
- Compare a pre‑packaged Chapter 11 filing to a traditional free‑fall Chapter 11. Under what circumstances is a pre‑pack infeasible, forcing a company into a contested Chapter 11 proceeding?Advanced
- The Second Circuit’s *Momentive* decision addressed the enforceability of make‑whole premiums in bankruptcy. What is the general rule regarding make‑whole premiums when a debtor repays debt ahead of schedule in Chapter 11, and why do creditors often lose their claim to such premiums?Elite
- In a Chapter 11 case, a debtor proposes to sell substantially all assets under Section 363. A stalking‑horse bidder has agreed to pay $500 million in cash, and the secured lender plans to credit bid its $450 million claim. How does a credit bid work, and what protections exist for other bidders and creditors? What are the risks for unsecured creditors?Advanced
- A distressed company is considering an out‑of‑court exchange but runs into the holdout problem: the indenture requires 100% consent to change payment terms, and holdouts could sue. Analyze the trade‑offs between initiating a pre‑packaged Chapter 11 and proceeding with a pure out‑of‑court exchange with exit consents. Assume the company has NOLs that would be limited under Section 382 if an ownership change occurs.Elite