Capital Markets
~75s

ECM/DCM Interview Cases & Live Deal Scenarios

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Investment CaseQuestion 1 of 4

Read the scenario below and answer the questions

Company Snapshot

EuroGrid AG is a European regulated utility planning to acquire a renewable developer.

  • •LTM EBITDA: €500M
  • •Net Debt (today): €1.4B (Net leverage = 2.8x)
  • •Credit rating: BBB- (management wants to stay investment grade)
  • •Target max net leverage: 3.2x to protect the rating
  • •Equity market cap: €6.0B
  • •Shares outstanding: 200M
  • •Share price: €30

Funding Need

Total funding requirement = €800M

  • •€200M to refinance a near-term maturity
  • •€600M to fund the acquisition

Market Backdrop

  • •DCM: 5-year swaps = 2.5%. BBB- new issue spread was ~150 bps, but widened by +50 bps recently.
  • •ECM: A follow-on would likely price at a 6% discount to the last close.
  • •Primary calendar is busy, and there is a major political event in ~2 weeks (potential volatility).
easyECM

Based on the case, which recommendation is most consistent with EuroGrid AG's goals?

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