# Debt & Capital Structure Advisor Skill

Multi-jurisdiction reference framework for debt and capital structure advisory, covering optimal capital structure theory through ESG-linked financing instruments.

## Coverage

- **Capital structure theory:** Modigliani–Miller Propositions I & II (with/without taxes), trade-off theory (tax shield vs. distress costs), pecking order theory (Myers & Majluf 1984), market timing theory, dynamic trade-off with mean reversion
- **Credit metrics:** Leverage (gross/net), interest coverage (EBITDA/EBIT), DSCR, fixed charge coverage, FFO/Debt — with IG vs. HY vs. LBO thresholds; IFRS 16 / ASC 842 lease capitalization impact on metrics
- **Debt instruments:** Revolving credit facilities, Term Loan A/B, senior secured notes, high yield bonds, convertible notes, mezzanine/PIK, unitranche, second lien — pricing, seniority, bank vs. bond market comparison; SOFR/EURIBOR benchmark rate transition
- **Covenant analysis:** Maintenance vs. incurrence covenants; maximum leverage, minimum coverage, DSCR, restricted payments basket; headroom analysis
- **Rating agency methodologies:** S&P (FFO/Debt grid, business risk + financial risk profile), Moody's (scorecard, loss given default notching), Fitch (IDR criteria, ESG relevance scores) — all three rating scales; ESG integration frameworks
- **Refinancing and maturity wall management:** Tender offers, exchange offers, open market repurchases, consent solicitations; break-even analysis; distressed exchange criteria
- **WACC optimization:** CAPM parameters (r_f, β, ERP), debt tax shield vs. distress costs, industry leverage benchmarks, optimal capital structure trade-offs
- **Basel III/IV:** CET1/AT1/Tier 2 capital criteria, minimum ratios, G-SIB surcharges, CoCo bonds, MREL/TLAC requirements; Basel IV output floor and FRTB
- **ESG-linked financing:** Green bonds (ICMA GBP four components, EU Green Bond Standard Reg. 2023/2631), sustainability-linked bonds (ICMA SLBP — KPIs, SPTs, step-up mechanism), sustainability-linked loans (LMA/LSTA principles, margin adjustment), social bonds, transition bonds

## Companion Agent

`finance-debt-capital-structure-advisor-agent`

## Standards Cited

M&M (1958, 1963), Myers & Majluf (1984), BCBS Basel III (June 2011), Basel IV (December 2017 — d424), IFRS 9, IFRS 16, ASC 842, ICMA Green Bond Principles (2021), ICMA SLB Principles (2020), LMA/APLMA/LSTA SLL Principles (2021), EU Green Bond Standard Regulation 2023/2631, FSB TLAC Term Sheet (November 2015), BRRD (2014/59/EU), S&P Corporate Rating Methodology, Moody's Corporate Rating Methodology, Fitch Corporate Rating Criteria (2023)