First or Second Lien Debt Simulation

In the simulation, participants will:

• Analyze a detailed company case and market briefing to understand financing needs and constraints.

• For Lender Teams: Structure a proposed financing package, deciding on the split between first and second lien tranches, pricing, covenants, and fees.

• For the Borrower Team: Evaluate competing term sheets from lenders, benchmarking terms and modeling the impact on the company's financials.

• Engage in direct, time-limited negotiations to secure or provide capital on the most favorable terms.

• Make strategic concessions on pricing, covenants, or tranche size to win the deal or protect key interests.

• Submit a final negotiated term sheet and justify the structure in a final presentation or memo.

• Explain the structural differences and risk-return trade-offs between first lien and second lien debt.

• Analyze a company's capital structure needs and propose a layered debt solution.

• Construct a preliminary term sheet for senior and junior secured debt tranches.

• Negotiate key financing terms, including interest margin, covenants, and upfront fees.

• Understand the strategic priorities and constraints of different parties in a leveraged deal (borrower, senior lender, junior lender).

• Evaluate the impact of different debt structures on a company's balance sheet and financial flexibility.

1. Role Assignment and Briefing Participants are divided into teams, one acting as the corporate borrower, and the others as competing lender groups. All receive a comprehensive case pack with financials, a business plan, and market data.

** 2. Analysis and Strategy Development** Borrower teams analyze their needs and target terms. Lender teams analyze the credit, model returns, and draft an initial term sheet for a combined first/second lien offer.

3. Negotiation Rounds The borrower team engages in separate negotiations with each lender team. Teams negotiate key terms like the size of each tranche, interest rate/OID for each lien, covenant tightness, and prepayment penalties.

4. Deal Finalization Following negotiations, the borrower team selects a "winning" lender. Both the chosen lender and the borrower finalize and submit their agreed-upon term sheet.

5. Presentation and Debrief Teams present their final deal structure, explaining the rationale for their choices. A facilitator-led debrief reviews the outcomes, highlights key learning points on capital structure, and compares the strategies of different teams.

• Who is this First Lien/Second Lien debt simulation designed for? It's ideal for participants interested in leveraged finance, investment banking, private credit, private equity, and corporate development.

• Do I need prior experience in debt markets? A basic understanding of corporate finance and debt and equity concepts is helpful, but the simulation includes instructional content to bring all participants up to speed on key secured lending concepts.

• How long does the First Lien/Second Lien simulation run? The core simulation is designed for a 3-4 hour session, but it can be extended for deeper analysis or condensed into a shorter module.

• Is this simulation individual or team-based? It is primarily a team-based simulation, reflecting the collaborative and competitive nature of real-world debt deal-making.

• Are the financial models and scenarios realistic? Yes. The simulation uses realistic financial statements, credit metrics, and market dynamics based on actual leveraged transactions.

• Can the simulation focus on specific industries or situations? Absolutely. The company profile, industry, and financing purpose (acquisition, recapitalization) can be tailored to match program learning goals.

• How is performance measured for participants? Performance is measured holistically based on the financial attractiveness and robustness of the final term sheet, negotiation strategy, and the ability to justify the deal structure.

• What roles does this simulation prepare participants for? It prepares participants for roles in leveraged finance syndication, private credit, restructuring, investment banking, and corporate treasury.

• The quality and rationale of their proposed or accepted debt structure.

• The financial terms achieved relative to their role's objectives (e.g., cost of capital for the borrower, risk-adjusted return for the lender).

• Effectiveness during negotiations and strategic decision-making.

• Clarity and persuasiveness in presenting and defending their final deal.