Debt Issuance Simulation

In the simulation, participants will:

• Analyze the company's financial statements and strategic needs to determine the optimal amount and purpose of debt.

• Structure the bond offering, making critical decisions on maturity, coupon type, and callable features.

• Interact with a simulated credit rating agency to (hopefully) secure a favorable credit rating.

• Price the Bond by setting an initial price talk (credit spread) and adjusting it based on simulated investor feedback.

• Market the Deal by creating a "roadshow" presentation to pitch the bond's value to institutional investors.

• Manage the Bookbuilding process, monitoring orders from different investor types (pension funds, asset managers, etc.).

• Execute the Trade by setting the final coupon rate and allocating bonds to investors.

• Analyze the Outcome by calculating the final cost of debt and evaluating the success of the issuance against initial objectives.

• Explain the strategic reasons for raising debt and the key stakeholders involved in the process.

• Evaluate the trade-offs between different debt instruments and structures.

• Calculate the all-in cost of debt for a corporation, including coupon and issuance costs.

• Develop a compelling investment thesis to market a bond to potential investors.

• Analyze investor demand and market conditions to optimally price a bond issue.

• Critique the terms of a bond indenture, including the impact of covenants.

1. Team Formation and Briefing Participants are divided into teams representing either a Corporate Treasury or an Investment Banking syndicate. They receive a detailed company case study and market data.

2. Analysis and Structuring Phase Teams analyze their financials, run scenarios, and make their initial structuring decisions.

3. Rating Agency and Pricing Phase Teams receive a simulated credit rating based on their decisions. They then enter the initial price talk for their bond.

4. Marketing and Bookbuilding Phase The simulation opens the "order book." Teams must react to live, simulated investor demand, which can be strong, weak, or concentrated in certain maturities.

5. Execution and Allocation Phase Based on the book, teams set the final coupon and allocate bonds. The simulation engine calculates the final cost of debt and the success of the issuance.

6. Debriefing A comprehensive review session led by the instructor connects the simulation outcomes to real-world debt capital markets theory and practice.

• Who is the target audience for this Debt Issuance Simulation? This simulation is designed for MBA students, finance undergraduates, corporate finance professionals, and investment bankers seeking to deepen their practical understanding of debt capital markets.

• What are the technical requirements to run the simulation? The simulation is entirely web-based and runs on any modern browser (Chrome, Firefox, Safari). No special software installation is required.

• Do participants need prior debt market experience? No prior experience is necessary. The simulation includes foundational learning materials and is designed to be accessible to those new to the topic while providing deep, strategic challenges for more experienced participants.

• How long does a typical simulation session last? A full simulation can be run in a 3-4 hour intensive workshop or extended over multiple sessions within a course module to allow for deeper analysis and reflection.

• Is this a competitive simulation? Yes, teams are often ranked based on key metrics such as the final cost of debt, the oversubscription rate of their bond, and the effectiveness of their structuring decisions.

• Can the simulation be customized for our specific course or training program? Absolutely. We can work with you to customize case parameters, company profiles, and market conditions to align with your specific learning objectives.

• What makes this simulation different from a traditional case study? Unlike a passive case study, this is a dynamic, decision-driven experience. Participants see the immediate consequences of their choices in a volatile market, fostering a much deeper and more memorable learning experience.

• How does the simulation handle different market environments? The simulation engine can be configured for various macroeconomic backdrops, allowing participants to experience issuing debt in both benign and challenging market conditions.

• Success in achieving a low cost of debt.

• High demand from quality investors, and efficient execution.

• Ability to adapt and revise valuations in light of news shocks or changes

• Collaboration, division of work, integration of roles, and final coherence

• Rating by peers and self-reflection on approach and decisions