How it works
Two questions, one lesson
1
Request the Materials
Sign up below and we'll email you the offering memorandum, the relevant builder basket provisions from a live high yield deal, and full submission instructions.
2
Do the Work
Calculate the builder basket capacity under the "greater of" construction. Each of the three measures produces a different number. Your job is to work out which one governs and show how you got there.
3
Submit Your Answer
Follow the instructions in the email to submit your point estimate, the range you expect other participants to land in, and your full working. The range question is the one that matters most.
Why this matters
This isn't a math test
The builder basket in this deal defines capacity as the greater of three different measures: the 50% CNI basket, the excess cash flow basket, and an EBITDA-less-interest-expense basket. You calculate all three and take the highest. Each produces a different number. Each involves different assumptions.
The result is a provision that is so far from the original intent of the clause that it no longer adheres to the principle it was designed to enforce. The "greater of" construction guarantees the largest possible capacity at any point in time. It doesn't restrict. It doesn't protect. It's a made-up number, whichever of the three formulations the company's lawyers deem most favorable.
If there's no single right answer, then everyone who submits a good-faith estimate with a defensible range is arguably correct. And that's exactly the problem.
Most credit analysts think there's a number. They think they can calculate it, compare it to enterprise value, and move on. The reality is that your value leakage isn't a point forecast. It's a probabilistic range of outcomes, and you need to price it accordingly.
We're running this challenge to make that visible.
Who Should Enter
Everyone who touches credit docs
Lawyers
You draft these. Can you calculate them?
Credit Analysts
You price around them. Do you know the range?
Portfolio Managers
You approve the risk. What are you approving?
Accountants
You audit the numbers. Which number is it?
The Rules
Simple and transparent
01
Entries are open to anyone working in credit, legal, accounting, or related fields. No purchase required.
02
You must submit two things: your point estimate of the builder basket capacity, and the range you believe other participants' answers will fall within.
03
Show your work. A number without reasoning won't be counted.
04
All valid entries go into a draw. The three winners are selected at random, not by accuracy.
05
Three prizes: grand prize of $500 plus one year of access to every FLT course; second prize of $250 plus our flagship course and two advanced courses for one year; third prize of $100 plus our flagship course for one year. One entry per person.
06
After the draw, we'll publish an anonymized summary of submissions to illustrate the range of interpretations.
07
Entries close [DATE TBC]. Winners announced on LinkedIn and via the Arc of the Covenant newsletter.
Enter the challenge
Request the materials
Fill in the form below and we'll send you the offering memorandum, the specific provisions in question, and full instructions on how to submit your answer. Entries close [DATE TBC].