Leveraged Lending vs Leveraged Finance at BB

Okay I was wondering if anyone could tell me what the difference is between a leveraged lending firm such as Antares Capital or Golub Capital and a leveraged finance division at a BB in terms of what they do. The seem similar so is it just semantics?

Note: Obviously the lenders I mentioned are MM, but I'm just wondering if there is any difference between what they do or is it the same?

Thanks

 

I would assume the roles are somewhat similar, but here's what I infer: the mechanics for the institutions are different. In other words, the leveraged lenders would retain the loan in their portfolio, while the investment banks would either do HY bond issuances, or securitize the leveraged loans & allocate them to other institutions. At the end of the day, you're still looking at the credit & underwriting something.

Someone else with more knowledge might be able to help you better, as these are just my thoughts.

 
Best Response

Before being sold to CPPIB, Antares was the sponsor coverage division at GE Capital. GE Capital was in the business of underwriting middle market leveraged loans for LevFin transactions and general corporate purposes. Debt raised for clients is then syndicated to other middle market lenders, which could include Golub.

Golub is a BDC, which functions similarly to a credit fund. BDCs lend directly to middle market companies. But whereas Antares (or GE) was interested in underwriting volume and generating capital markets fees, Golub has more limited funds and is more concentrated on generating yield from a loan book for their LPs.

LevFin groups at a BB bank (BofA, JPM) operate more similarly to a GE Capital just on a larger scale, both in terms of clients and debt quantoms. They will also provide clients with access to the bond market, which can include high yield bonds. Bonds are not a common method of debt financing in the middle market given that most companies will be private. However, Leveraged Loans and Unitranche debt have taken on a lot of the structural characteristics of a High Yield debt in Credit Agreement terms (e.g., covlite, basket definitions, Available Amount).

These are just a few high level differences.

 
AsAnalyst14:
Bonds are not a common method of debt financing in the middle market given that most companies will be private.

I'd attribute it to liquidity rather than public / private status. For a small or MM company, the size of a bond issuance isn't going to provide sufficient liquidity for a HY investor. In comparison, a TLB can be executed with relative ease and at better terms.

 

Both posters above are correct, although I would characterize Antares as more underwriting to hold shop which is more feasible in the middle market given the deal sizes (they have a substantial loan portfolio which was attractive to CPPIB). Lev fin at an investment bank there's some degree of underwriting to hold but the ultimate goal is to syndicate and de-risk, generate fee income and repeat. If you're not planning to hold a substantial amount of the debt post close, IB LevFin is more focused on underwriting to make sure the debt clears the market versus taking a view on a 5-7 year time horizon of the credit.

 

Thanks for the response! Can you explain why that may be the case? From what the guys said above it appears to be exactly like leveraged finance except you only use debt instruments that are used in the MM (i.e. unitrance, senior loans, junior, etc. no bonds) I know they also do LBO modeling for their transactions. So why, in you opinion, would someone need to go to IB first?

Thanks again!

Career Advancement Opportunities

March 2024 Investment Banking

  • Jefferies & Company 02 99.4%
  • Goldman Sachs 19 98.8%
  • Harris Williams & Co. (++) 98.3%
  • Lazard Freres 02 97.7%
  • JPMorgan Chase 03 97.1%

Overall Employee Satisfaction

March 2024 Investment Banking

  • Harris Williams & Co. 18 99.4%
  • JPMorgan Chase 10 98.8%
  • Lazard Freres 05 98.3%
  • Morgan Stanley 07 97.7%
  • William Blair 03 97.1%

Professional Growth Opportunities

March 2024 Investment Banking

  • Lazard Freres 01 99.4%
  • Jefferies & Company 02 98.8%
  • Goldman Sachs 17 98.3%
  • Moelis & Company 07 97.7%
  • JPMorgan Chase 05 97.1%

Total Avg Compensation

March 2024 Investment Banking

  • Director/MD (5) $648
  • Vice President (19) $385
  • Associates (86) $261
  • 3rd+ Year Analyst (13) $181
  • Intern/Summer Associate (33) $170
  • 2nd Year Analyst (66) $168
  • 1st Year Analyst (202) $159
  • Intern/Summer Analyst (144) $101
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

1
redever's picture
redever
99.2
2
Secyh62's picture
Secyh62
99.0
3
Betsy Massar's picture
Betsy Massar
99.0
4
BankonBanking's picture
BankonBanking
99.0
5
kanon's picture
kanon
98.9
6
CompBanker's picture
CompBanker
98.9
7
dosk17's picture
dosk17
98.9
8
DrApeman's picture
DrApeman
98.9
9
GameTheory's picture
GameTheory
98.9
10
bolo up's picture
bolo up
98.8
success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”