A bank analyst observes a first lien bank loan maturing in two years with a spread of
Question:
A bank analyst observes a first lien bank loan maturing in two years with a spread of 100 bps from an issuer considering a new second lien bank loan. Using average historical volume weighted corporate debt recovery rates (RR) as a guide, what is the estimated credit spread for the new second lien bank loan?
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1 Using the POD approximation POD SpreadLGD and LGD 1 RR the analyst uses the curre...View the full answer
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