Risk Underwriter — Banco Atlântico Norte's €45M LBO Term Loan

A four-round, advanced credit-risk and leveraged-finance simulation set inside Banco Atlântico Norte (BAN), a mid-sized Portuguese commercial bank in Porto with a €6.8B loan book and a corporate-and-leveraged-finance desk. You are the desk's underwriting team, facing one mandate under a 72-hour committee deadline: a private-equity sponsor wants BAN to fund a €45M senior term loan for the leveraged buy-out of Cerâmica Duramax, S.A., a profitable Aveiro industrial-tiles maker (€88M revenue, €14.2M audited EBITDA). The trap is the sponsor's '€17.5M adjusted EBITDA' — built on €3.3M of add-backs the auditors never signed: a €2.1M related-party management fee and 'one-off' restructuring costs recurring three years running. The whole debt capacity rests on it: lend against €17.5M and leverage looks like 2.6×; strip the add-backs to a defensible €14.2M underwriting EBITDA and it is really 3.2×. The leveraged-finance sub-portfolio is already at 84% of its €1.2B internal limit, so this is also a portfolio decision. Round 1 — Read the Borrower: interrogate the financials through a financial-information-quality lens (Cunha), accept or reject each add-back, judge receivables that crept from 52 to 71 days, and set a defensible underwriting EBITDA. Round 2 — Score the Default Risk: compute leverage, interest cover and debt-service cover off your EBITDA, map an internal rating / PD band, and stress a 25–30% cyclical EBITDA decline. Round 3 — Price the Loan and Set the Covenant: set the margin over Euribor so risk-adjusted return (RAROC) clears the desk hurdle after expected loss (PD×LGD) and capital cost — holding the line against the sponsor's Euribor+350 ask versus the model-implied Euribor+475 — and design maintenance covenants (max leverage, minimum interest cover, cash-sweep) plus an equity-cushion / amortisation call. Round 4 — Portfolio Decision and Credit-Committee Pitch: place the deal in a near-full, cyclical book and choose approve / approve-with-conditions / decline / approve-at-reduced-hold (syndicate part), then defend price, covenants and concentration to the committee. The math rewards stripping the disputed earnings, pricing to the RAROC hurdle, building real early-warning covenants and respecting the portfolio limit — and punishes the five classic errors: underwriting to the sponsor's adjusted EBITDA, pricing to win the mandate, weak or missing covenants, ignoring the portfolio limit, and a reflexive binary decline instead of 'yes, if' structuring. Final KPIs track underwriting EBITDA quality, true leverage, RAROC versus hurdle, covenant strength and portfolio fit. Currency: EUR.