Fusing Leveraged Finance and Option Pricing

Three statements built to tie and stay auditable on an IFRS basis. The cash flow is derived, not plugged, so every figure traces back to a driver or a stated assumption — and feeds the asset value and volatility the later option work needs.

Build revenue from volume and price by segment and geography, then work margins down to EBITDA, separating the structural cost base from the part that flexes with the top line.

Capex schedules with D&A run by asset class; working capital off receivables, inventory and payables, including bad-debt provisions and defaulting customers; plus leases, pensions, deferred tax and an FX reconciliation, so the cash flow reads correctly.

Flex the drivers across base, upside and downside, then step from annual to quarterly — the resolution at which covenant headroom and liquidity actually bind, with timeline, seasonality and LTM tracked through.

The sub-investment-grade market as it actually funds and trades: leveraged loans versus high yield, the capital stack from super-senior revolver through first-lien term loan to junior debt, OID and call protection, and the path from term sheet to allocation.

Start with the perimeter: restricted versus unrestricted subsidiaries, guarantor coverage, the excluded-subsidiary list and the Agreed Security Principles. You underwrite the obligor group and the documents that bind it. A sponsor's reputation is not collateral.

How debt enters through the ratio test and the basket corridor — free-and-clear, growers, the accordion, MFN protection and its sunset — and how value exits through the restricted-payments builder, typically 50% of consolidated net income, plus the standard carve-outs.

Asset sales, change-of-control and amendment mechanics define what the borrower may do under stress, including drop-down and uptier moves. The teaching framework starts from the weakest drafted term in each selected provision, then specifies the holder, legal states, exercise conditions, blockers and interactions.

Build one model that joins the operating business to its capital structure, present and future, so a change to either side flows through to leverage, coverage and the value left for equity.

Make operating and capital-structure assumptions live levers. Run the cases a company actually faces and read what each path does to covenant headroom and the owner's return.

Trace the owner's real options under stress: refinancing risk and market access, asset sales and where the covenants send the proceeds, and the amendment, waiver and voting mechanics that decide who consents.

Test selected routes the documents may permit — incremental debt, permitted investments, dividends and refinancing — then map those rights into contingent-payoff structures and assumption-dependent teaching estimates.

A repeatable process for finding financeable situations rather than waiting for them. You define a thesis, build a screen against it, and maintain a pipeline you can defend to an investment committee.

The screens, signals and triggers that surface refinancings, maturities, sponsor exits and capital-structure stress. The session assumes access to a market data platform, and shows how to use one well.

Identify listed companies whose cash flows, asset base and ownership make them plausible buyout and financing targets, and read a balance sheet for the debt capacity a sponsor would underwrite.

Turn a sourced situation into an evidence-backed financing case for both sides of the table. The decomposition is used as a teaching diagnostic for assumptions and selected rights, not as a price, relative-value conclusion or recommendation.