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.
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.
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.
I work at Antares, along side the Golub's, Madison's, NXT's of the world, and your answer is succinct, polished and accurate. Top marks.
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.
Could someone working at Antares exit to MM PE?
It's possible but probably tough to go from Antares to MM PE directly. Might have to take a stepping stone in between, something like Antares to IB to PE.
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!
Can't speak for Anteres, but I worked elsewhere at GE Capital and we had several exits to buy side debt funds. The name definitely carried and got me into IB. I would assume the Antares name would have a similar effect.
Also interested - currently have an offer for an internship with Antares. Does it seem like a good place to start a career?
I don't know a ton about the company but I'd say yes - it's well known and well regarded, which are obviously two pluses if you decide to stay in finance.
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