Debtor vs Creditor RX?
Hi
I am interested in RX IB. From the west coast so I for sure am looking at the likes of HL RX LA. but I have read that each of the boutiques operate their RX practices differently, depending on if they typically assume the role of the creditor vs the debtor. is this true? if so, would my analyst experience be altered greatly depending on the bank(s) i get into?
I am sure that any of the top rx shops will give me solid skills post-banking but I was curious if this is something that I should take into consideration when recruiting. If each bank is different in its experience offered, why not just join a shop like moelis that has a strong generalist program that includes additional groups like M&A on top of RX, making it a more comprehensive learning experience?
come back when u get the offers, RX shops aren’t exactly easy to recruit for
most shops would give you exposure to both (even a creditor-focused shop like HL still works on many debtor engagements - eg most famous one recently is evergrande)
Lol
Understanding the difference between the mandates isn’t a bad question and would be good to do prior to interviews. Some people come to interviews essentially saying ‘I see you are more weighted towards x, which is what I want.’ Asking the right questions on how the role impacts analyst experience helps you take that answer one step further.
Point is, not sure the ‘get an offer first’ response is good advice much less helpful
a search on wso or google would’ve answered his/her question - this has been discussed ad nauseam
my point is, that, given the limited number of rx shops, it’s a bad strategy to just exclusively recruit for debtor or creditor focused groups
and even if u have a preference, all rx shops will have mandates for both sides anyway (hence the HL example)
https://www.wallstreetoasis.com/forums/what-do-restructuring-bankers-do…
https://www.wallstreetoasis.com/forums/debtor-vs-creditor-restructuring…
https://www.wallstreetoasis.com/forums/why-is-hl-rx-considered-top-if-i…
Have a buddy at HL RX who shockingly really likes it. He's not in LA though, but the hours don't seem terrible. He says creditor side is better because you work with the same firms a lot so there's less pitching, which I guess makes sense. This friend has a b school buddy who I met and works at an EB RX group and is getting crushed, actively looking to leave, so YMMV. Debtor side probably more comprehensive experience though.
great great great response, thank you! looking to get some data points for a more concrete conclusion on this stuff but whatever I read is always so subjective based on the individual and how they interact with their group lol
If your company side, your role is to find a cap stack that works for everyone with people across the capital structure who will have opposite interests (e.g. it’s a zero sum game, so the senior creditors and the junior creditors will want opposite things). Probably more interesting, more “prestigious” and definitely more fees generating.
Also a lot more game theory involved, i.e. a company which is in deep distressed often needs new money so you need to convince people who are about to lose $$ to put fresh funds in, so you’ll have endless discussions on what carrots and what sticks you can use (i.e. if you don’t participate in the new money, you will get primed by everyone else who does)
If you’re lender advisor, your job is to receive the proposal from the company and try and tweak it / re-do it so you can maximise recoveries for lender group, at the expense of either the other creditors or the shareholder who’s also trying to save what they can
The reality is that every good RX shop will first pitch the company and if they don’t get the role they will pitch the lenders so you should definitely see both types of mandates
A separate thought is that other than the big Chinese developer stuff, there’s not a ton of RX activity happening at the moment so not sure there is a ton of recruiting happening
I think this is generally right, and I do personally prefer the company side roles, primarily because (1) you get to see the entire transaction and (2) your role as an RX advisor is generally more valued since companies are hopefully less familiar with restructurings and liability management (contrast this with working creditor side where nearly everyone is an expert in distressed or workouts). That said, on the company-side there's a lot of BS that you have to wade through because you're dependent on the FP&A / Treasury department of a bankrupt company. Models in particular are often atrocious and it's your job as the company-side advisor to facilitate diligence (i.e. clean everything up / tick and tie).
With the creditor-side, your diligence requests have been filtered by the Company-side advisor, so the materials are generally at least in presentable shape (not that they don't require scrubbing). On top of that, depending on your role, you get to think a bit more like an investor because your clients will be focused on recoveries, returns, etc. As someone else mentioned, if you're advising a fulcrum class (and particularly if they're writing a new money check), often a decent chunk of time will be helping your clients think through the value of the business (that said given that you're in RX banking, the bulk of your work is still helping your clients structure a transaction). Lastly, as I mentioned, the dynamic shifts when you work as a creditor advisor because all of your clients will have at least someone on their team who is way more knowledgeable about distress than you are (that said, you get exposure to how these investors think, which can be interesting).
Point of all of this is that there are pros and cons to debtor and creditor work, and it's important to remember that there are distinctions between creditor side assignments (steer clear of shops that mainly advise UCC or Equity committees).
Also to add: there are simply more lender mandates around - for every situation, you will have a single company side, but maybe 3, 4 or sometimes even 5 different creditor groups with their own advisor (e.g. senior secured with different collateral, senior unsecured, bond holders to the restricted group, ABL lenders etc. etc.)
just to tack on.... creditor mandates vary in quality. ideally you advise the fulcrum security and try to underwrite the equity case
I would echo the above that targeting a specific shop because it is known for creditor vs. debtor is not a good strategy. All good RX shops will have top notch deals to work on and you will learn regardless in your short analyst tenure, and the core education/training will be essentially the same. The threads linked above already have this information.
In a perfect world you get staffed on a marquee deal for each, but the reality is no matter the shop (HL or PJT etc), you could work on a debtor-side restructuring for 1-2 years, a creditor side deal for 1-2 years...or you could work on a government restructuring...or your deal could end up in lengthy litigation... any good RX banker / legal advisor (or really any dealmaker) has to try to understand all the constituents' perspectives anyway.
The quality of exit will be dependent on the individual, and by the time you even know whether you like creditor vs. debtor more you will have left. If you are thinking about staying in banking, only certain banks even allow you to stay on (PJT is a 2 and out program - this helps with strong exits since it's predetermined).
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