Value investing · Course 29 of 39 · Judging a business
When the capital structure decides
Lay out a real company's claims in order, compute covenant headroom from the filing, find the fulcrum, and read the share count after a Chapter 11.
Two lessons in this academy stop exactly where the work starts: who gets paid first, and what a covenant is. This course is the doing.
Eight lessons, on real filings. Laying a live company's claims out in order with what is owed on each. Computing covenant headroom from the filed numbers, and finding out why that computation is not the covenant. The obligations that are not called debt: receivables sold to a bankruptcy-remote subsidiary, a guarantee that is missing, a contract that binds a customer. The difference between a company that cannot pay this month and one that cannot pay at all. Then a closed, documented reorganisation from the outside: where the value broke, what a liquidation analysis looks like, how the process runs, and why the first thing to find in a reorganised company is its new share count.
It assumes the credit course and a working knowledge of a balance sheet.
The test, not the verdict
When the capital structure decides is 8 lessons on the tests and where their lines sit. Whether a company you hold clears one of them is a separate question that needs its filings read, and nothing on these pages has read them.
Related
- Who gets paid first is the ranking this course makes into a working exercise on real filings.
- Covenants, and what they protect is what a covenant is, before this course computes the distance to one.
- Equity after bankruptcy is the equity that exists on the other side of the process described here.
See our methodology for how the product reads a filing and what it refuses to compute.