6．Which of the following statements is most accurate regarding the issuance of high yield debt under a holding company structure?

A)   The analysis of subsidiary financial ratios and performance is unimportant because the debt repayment is made from the parent's cash flows.

B)   Debt is borrowed at the subsidiary level and funds to pay the obligation are obtained from the parent company.

C)   Debt is borrowed at the parent company level and funds to pay the obligation are obtained from operating subsidiaries.

D)   An analysis of the subsidiary's debt covenants is unimportant because the parent is responsible for servicing the debt.

7．High yield debt structures will least likely have which of the following characteristics?

A)   Well collateralized senior debt.

B)   Senior subordinated debt.

C)   Payment-in-kind bonds.

D)   Bank debt.

8．All of the following are characteristics of bank debt
   EXCEPT:

A)   Banks have a high priority over the assets of the firm.

B)   Bank debt tends to be short term.

C)   Bank debt tends to have a principal value that is indexed to the rate of inflation.

D)   Bank debt is usually floating rate debt.

9．Which of the following debt obligations exposes the firm to the risk of illiquidity due to rising interest rates?

A)   Subordinated fixed-rate debt.

B)   Reset notes.

C)   Bridge loans.

D)   Payment-in-kind bond.

10．Which of the following statements regarding the debt structure of a high-yield issuer is FALSE?

A)   High yield issuers rely on bank loans to a greater extent than investment-grade issuers.

B)   A high-yield issuer can rely on a high-interest bank loan to provide liquidity if the firm has sufficient assets to cover at least 70% of the bank's claim.

C)   Senior bondholder claims are subordinate to claims of bank loans.

D)   High yield issuers have debt structures that typically include bank debt, brokers loans, reset notes, senior debt, senior subordinated debt, and subordinated debt.

11．Which of the following is NOT a feature of bank debt?

A)   Bank debt generally has priority over other debt holders on the firm's assets.

B)   Bank debt is typically short-term.

C)   Bank loan contracts generally have little or no negative covenants.

D)   The interest rate on bank loans is generally a floating rate.

[此贴子已经被作者于2008-4-14 14:34:25编辑过]

6．Which of the following statements is most accurate regarding the issuance of high yield debt under a holding company structure?

A)   The analysis of subsidiary financial ratios and performance is unimportant because the debt repayment is made from the parent's cash flows.

B)   Debt is borrowed at the subsidiary level and funds to pay the obligation are obtained from the parent company.

C)   Debt is borrowed at the parent company level and funds to pay the obligation are obtained from operating subsidiaries.

D)   An analysis of the subsidiary's debt covenants is unimportant because the parent is responsible for servicing the debt.

The correct answer was  C)

Debt is borrowed at the parent company level and funds to pay the obligation are obtained from operating subsidiaries.

7．High yield debt structures will least likely have which of the following characteristics?

A)   Well collateralized senior debt.

B)   Senior subordinated debt.

C)   Payment-in-kind bonds.

D)   Bank debt.

The correct answer was  A)

It is unlikely that high yield debt will be well collateralized. If a high yield issue is collateralized, the collateral will be on an uncertain nature.

8．All of the following are characteristics of bank debt EXCEPT:

A)   Banks have a high priority over the assets of the firm.

B)   Bank debt tends to be short term.

C)   Bank debt tends to have a principal value that is indexed to the rate of inflation.

D)   Bank debt is usually floating rate debt.

The correct answer was  C)

Bank debt tends NOT to have a floating principal value.

9．Which of the following debt obligations exposes the firm to the risk of illiquidity due to rising interest rates?

A)   Subordinated fixed-rate debt.

B)   Reset notes.

C)   Bridge loans.

D)   Payment-in-kind bond.

The correct answer was  B)

A reset note is a debt obligation where the coupon interest rate is reset periodically. As a result, the analyst needs to assess the impact that rising interest rates would have on the firm’s ability to honor these security contracts.

A payment-in-kind bond is where a high yield issuer has the option to either pay interest in cash or pay the equivalent of interest with another bond with the same coupon rate.

Subordinated fixed-rate debt is debt that is paid after other more senior debt is paid off.

A bridge loan is a short-term loan made in anticipation of intermediate-term and long-term financing.

10．Which of the following statements regarding the debt structure of a high-yield issuer is FALSE?

A)   High yield issuers rely on bank loans to a greater extent than investment-grade issuers.

B)   A high-yield issuer can rely on a high-interest bank loan to provide liquidity if the firm has sufficient assets to cover at least 70% of the bank's claim.

C)   Senior bondholder claims are subordinate to claims of bank loans.

D)   High yield issuers have debt structures that typically include bank debt, brokers loans, reset notes, senior debt, senior subordinated debt, and subordinated debt.

The correct answer was  B)

A bank will not grant a high-yield issuer a loan unless it has sufficient assets to cover the full loan amount. If the high-yield issuer cannot meet this requirement then it must defer to bridge loans and/or reset notes.

11．Which of the following is NOT a feature of bank debt?

A)   Bank debt generally has priority over other debt holders on the firm's assets.

B)   Bank debt is typically short-term.

C)   Bank loan contracts generally have little or no negative covenants.

D)   The interest rate on bank loans is generally a floating rate.

The correct answer was  C)

Bank loan contracts usually contain several negative covenants. Furthermore, bank debt is generally short-term, variable rate, and higher priority relative to other debt holders.