Why RX?

Question 1

Why a company would not be able to
roll over the debt?

Answer 1

• Limited Liquidity
• Blowing Through Covenants
• Credit Rating Downgrades
• Evolving Rates Environment

Stock declining is not a reflection of the capital structure

Question 2

What is a cap table?

Answer 2

A cap table is just a simple and digestible representation of a company’s capital structure that gives key details of each part of the capital structure (e.g., maturity, coupon rate, etc.)

Can be found in 10-K

Question 3

What does syndication mean for debt?

Answer 3

Syndication means that a bank will front the initial capital for the loan, but then sell off chunks of the loan to third parties (hedge funds, pension funds, CLOs,
etc.).

This debt will then trade on the secondary market and there will be active pricing
for these pieces

Question 4

What is a revolver?

Answer 4

Is like a credit card but does have a maturity date

tied to Inv or AR

Question 5

Is that AR Securtization Facility a revolver or a term loan?

Answer 5

it’s not given to them in a lump sum and paid back in a lump sum.

Thus, it’s a revolver

Question 6

What does unsecured vs secured mean in detail?

Answer 6

Secured debt is, as the name would imply, backed by some form of collateral. Unsecured means there’s a generalized claim on the assets of the company – from a priority perspective – but there’s no claim on specific assets.

Unsecured debt comes in the form of bonds, referred as “Notes”

Question 7

What is subordinate debt mostly comprised of?

Answer 7

Subordinated debt is almost always comprised of bonds that simply rank structurally lower than secured and unsecured debt.

Question 8

What is mezzanine debt mostly comprised of?

Answer 8

In reality, mezz debt is a catchall term. It includes things that have debt-characteristics, but are not clearly a bond, loan, or revolver. All mezz debt is unsecured.

Mezz debt includes things like convertible debt, preferred stock, PIK debt that otherwise has no collateral claim, etc.

Question 9

Negative Covenants

Answer 9

Additional Indebtedness
Restricted Payments
Change of Control
Asset Sale Proceeds
Acquisitions
Sale/Leaseback
Transactions with Affiliates
Lines of Business

Question 10

Maintenance / Incurrence Covenants

Answer 10

Maintenance:
- Total Debt / EBITDA
- Senior Debt / EBITDA
- Interest COV Ratio
- Limitations on CapEX

Incurrence Financials:
- Total Debt/ EBITDA
- Fixed Charge Cov Ratio

Question 11

Call Protection In Bonds

Answer 11

If a bond is issued at par ($100) – as is usually the case – if the company then wants to, for whatever reason, buy back the bonds within a certain period of time post-issuance, then they must pay $102 or $103 or some such number higher than par.

Question 12

What are Springers?

Answer 12

a covenant that is only activated when a specific condition is met.

If RCF drawn ≤ 40 → no covenant test
If RCF drawn > 40 → leverage covenant activates

Question 13

OUT-OF-COURT RESTRUCTURING

Answer 13

possibilities for how transactions can look are virtually
limitless

Trying to complete one of the following:

▪ Retire or otherwise extinguish the part of the capital structure that cannot be
simply re-financed.

▪ As a consequence of the transaction, ensure the company has adequate liquidity to ensure it’s viable moving forward (e.g., through reducing down its cash interest or getting an infusion of new capital).

▪ Delever the capital structure as much as possible

Question 14

What are Extensions?

Answer 14

• An amend-and-extend simply involves amending the underlying credit docs of a given security to extend out the maturity date

Question 15

What are Change of Terms?

Answer 15

Modifying the existing loan agreement instead of refinancing it.

• Maturity (extend)
• Interest margin (increase)
• Amortization (reduce or pause)
• Covenants (loosen/reset)
• Fees (consent fee, amendment fee)

Question 16

In-Court Restructuring