Goldman Sachs Interview Question: "Company A with a market cap ... | Glassdoor

Interview Question

Corporate Credit Sales Analyst Interview New York, NY

"Company A with a market cap of $25B announces a $5B stock

  buy-back program. How would the CDS on Company A react?"
Answer

Interview Answer

3 Answers

1

narrows

Anonymous on Mar 4, 2010
8

Is this correct? A stock buyback with reduce cash and equity, which increase the leverage ratio. That would increase the CDS spread.

Yorkville on Jul 11, 2010
2

Yorkville seems right. Leverage goes up and there is less cash now. Higher risk of default leads to higher risk premium --> higher cds spread

Anonymous on Jan 22, 2013

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