Corporate analyst interview questions shared by candidates
"Company A with a market cap of $25B announces a $5B stock buy-back program. How would the CDS on Company A react?"
Is this correct? A stock buyback with reduce cash and equity, which increase the leverage ratio. That would increase the CDS spread.
Yorkville seems right. Leverage goes up and there is less cash now. Higher risk of default leads to higher risk premium --> higher cds spread