Loan Syndications Group Info

I'm wondering if anyone can shed some light on the Loan Syndications Group? Is it a common group?, exit ops for analysts, general work involved? I'm assuming it is a Product Group within the IBD, but correct me if I'm wrong.

Looked it up briefly on wiki, but seems like most banks don't have the group?

Thanks.

 

As far as product groups it is very strong due to strong connection with the access to corporate/commercial bankers at the banks mentioned above. That being said anyone with any insight into a backwards looking view for a 1st yr analyst trying to get the best overall experience. Should DCM only be looked at if Industry groups and or M&A is not an option?

 

The reason I said that is this: not only is it a product group where you're doing actual execution, there's also constant dealflow so your modeling skills never get rusty. For example, there were some 350 syndicated loans done last year at Wells alone. That's almost a deal a day! Now think about industry groups. If you are in a lesser-known group on the street or within that industry you might spend a good 80% of your time just pitching. However as I've said before, this mostly pertains to banks with a strong commercial presence and a huge balance sheet to lend with.

 

I'm really interested in this as well. At WF, high-grade loan syndications group is separate from levfin and it doesn't sound like they (HGLS) do much modeling at all. However, the entire team seemed like really fun people to work with.

Any idea what the exit opps and bonus would be at a group like high-grade loan syndications relative to other groups at WF?

 
Best Response

Alright I can shed a little light on this:

In a typical bank, from what I have experienced and heard from others, the LevFin and Syndications groups will be separate. Not to dispel what nervous_nelly said, but there is a decent amount of mis-information flowing in this thread. There are many aspects to traditional a traditional "loan syndications" role. For starters, this group will typically be responsible for working on establishing new term loan and credit revolvers (essentially lines of credit) for investment grade clients (where leverage is not a major factor).

Once that is done, the "sales & syndicate/loan sales desk" (depending on your bank) will work to actually price the deal in the market. I don't know what the knowledge level is in this thread but essentially loans/RC's will price to the market based on a number of factors like the industry, risk of default, EBITDA sustainability, etc. Interest rate, LIBOR Floor, and the OID (original issue discount) will be calculated based on these same factors.

Typically, the goal for these deals is to be the "Left Lead", as you will be the head honcho in the deal and generate the most fee revenue in the deal. Typically, the arranger (or lead in this example) will then source out the loan by giving out other roles in the deal that essentially dole out smaller cuts of the fees. The bigger banks (JPM, Wells, BoA) will take a lot of left lead roles and and other roles and hardly ever act as a participant, where you are essentially just a large institution with a hold level on the loan with hardly any cut on the fee income. Smaller banks will typically hop on the ride for this if they think the investment makes sense and they buy the company's story.

When you are dealing with leveraged deals (typically companies that rate under BB+ with a significant amount of debt), it gets a bit hazier. Your traditional syndicated finance team will still act in a similar role from a loan sales standpoint, but the leveraged finance team will handle the modeling, structuring and generally collaborate with the sponsors/FIG group and communicate regularly with PE firms regarding said structure/pricing for their deals. Ideally, LevFin would be a much better opportunity from an exit ops standpoint.

If the bank you are applying to has a distinctive difference between syndications and LevFin, realize that the syndications side will be working with investment grade companies, do a lot of pitching and hardly any modeling. Assuming you have a close working situation with the loan sales desk, still a good opportunity because you will see how deals price and get a great understanding of the loan market.

I apologize for the diatribe but its a fairly complicated subject. Let me know if you have any other questions.

 

To add to above. The larger banks will take pure participating roles, e.g. if they don't win the pitch to lead the deal they'll be thrown some fees lower down the totem pole.

Not all LevFin teams model, it's a bank by bank situtation.

Syndications can be one of three things: actually pricing IG credits or a pure distribution function or both, again depends bank by bank.

LevFin>IG in everyway (unless you get hard for jumbo deals a la the BHP / Potash fac.)

"After you work on Wall Street it’s a choice, would you rather work at McDonalds or on the sell-side? I would choose McDonalds over the sell-side.” - David Tepper
 

bumping this old thread for a clearer answer on exit opps. I'm interested in a banking team at a large national bank that does unsecured (but sometimes secured) debt for non-investment grade (but often investment grade) companies in a particular sector.

So, while there is a fair amount of boring vanilla investment-grade lending that goes on, one would say that they also do junk debt, correct? Would the latter make it worthwhile experience? If not, why not?

 
bortz911:

bumping this old thread for a clearer answer on exit opps. I'm interested in a banking team at a large national bank that does unsecured (but sometimes secured) debt for non-investment grade (but often investment grade) companies in a particular sector.

So, while there is a fair amount of boring vanilla investment-grade lending that goes on, one would say that they also do junk debt, correct? Would the latter make it worthwhile experience? If not, why not?

I think you have the secured / unsec. the wrong way round. Generally, unsec. for IG, sec for LevLoans
"After you work on Wall Street it’s a choice, would you rather work at McDonalds or on the sell-side? I would choose McDonalds over the sell-side.” - David Tepper
 
bortz911:

bumping this old thread for a clearer answer on exit opps. I'm interested in a banking team at a large national bank that does unsecured (but sometimes secured) debt for non-investment grade (but often investment grade) companies in a particular sector.

So, while there is a fair amount of boring vanilla investment-grade lending that goes on, one would say that they also do junk debt, correct? Would the latter make it worthwhile experience? If not, why not?

I think you have the secured / unsec. the wrong way round. Generally, unsec. for IG, sec for LevLoans. And unless ABS, the security package doesn't matter on exit ops.
"After you work on Wall Street it’s a choice, would you rather work at McDonalds or on the sell-side? I would choose McDonalds over the sell-side.” - David Tepper
 
Oreos:

I think you have the secured / unsec. the wrong way round. Generally, unsec. for IG, sec for LevLoans. And unless ABS, the security package doesn't matter on exit ops.

They did recently do a private placement of unsecured debt for a non-IG borrower.

What WOULD the exit opps be? It's not entirely clear to me. Nonexistent? Go to work for a client in treasury or corp fin?

 

If I could do unsecured debt for non-IG names, I'd be an idiot - no bank would touch that sh*t w/ firm-wide reductions in RWA.

Actually, maybe Banco Popular - w/ all the Moody's and S&P downgrades, it's a wonder they're still operating on a traditional banking model (and I use "operating" loosely)

Calm down.
 

I know that at Barcap they have two loan syndicate groups, one dealing with IB clients and one with Corporate (smaller) clients. Same job, although I think the Corporate guys are a little more involved with origination too, as the clients generally have less of an idea as to what is going on.

Any idea on pay in these groups?

 

In terms of working on loans desk would echo the difference between Leverage and IG - however also make the following observations of a larger Banks function:

(1) Origination - is the pitch side working with the coverage teams and credit - regarded as a specialist structuring functions guiding on price, market conditions, expectations, trends, documentation, guiding and pitching etc. (2) Syndicate and Sales - there can be cross over between 1 & 2 however generally the sales desk is the reach out to market, understanding what other smaller Banks, funds, CLOs etc are looking for or what they may like. A deal can be open market or often limit to white list or bank list where the issuer will say I.e. we only want x or y bank or for example a commodity trader may have x2 RCFs on targeted for Asia market and another for European (Mercuria for example) (3) Loan Trading - this is another important function of the Syndication function dealing with tradin of existing loans and the Banks portfolio optimisation - as mention a lot of BB banks operate an originate to distribute model, but equally will run a trading book on "flow names" such a leverage credit which investor regularly buy and sell plus selling down from portfolio

The syndication function can also extended wider to other forms of finance i.e. banks will sell down and risk share trade finance deals (see BAFT MRPA for standard) or real estate finance, FI deals, PXF, project finance basically all types of debt.

Lastly as I see a lot of chat about pay would say look at Michael Page (UK) front office salary guide 2015 - this is a good free guide.

 

First of all, the difference between investment banking and commercial banking is, well, hazy at best. Clearly, M&A is an investment banking activity, as is equities origination, but things get fuzzy in the debt space. As long as your getting paid, the distinction is meaningless. The loan syndication group feeds into the PnL of a group that needs to make ROE of 15-20% which is a return much more in line with an investment bank thank a pure commercial bank.

 

I interned is a similar bank to BNP in syndications (in US) and can offer some advice: 1) No modeling 2) Mostly very basic comps analysis and the most basic credit/capital structure analyses 3) Drafting PIBs and working in PPT to build syndication marketing materials (ie investor presentations), very easy simple stuff 4) LevFin was housed in my bank's syndications group and was just barely more technical than generic IG loan syndication 5) At a bank like BNP (or comparable mid-tier), you will not be lead on most deals, just another player in the syndicate so your input on technicals/models (if there are any) will be very miniscule. Most of the work will be done by JPM/BAML/Citi in the IG space and JPM/BAML/CS in the LevFin space.

Nonetheless, loan syndications is a valuable corportate finance product to understand and will be a valuable experience along with solid pay.

Hope this helps! Cheers

 

Secured debt is hot right now, so it's a more competitive space, but JPM has always been solid and has been at the left on a lot of DIPs.

Most underwritings I've seen are a joint-effort between Lev Fin (IBD) - DCM (IBD-S&T hybrid) - and Loan Syndicate S&T (S&T). The Lev Fin effort is going to be the standard banking: models, pitches, etc. The DCM effort is going to be running comps, making the terms (pricing, covenants, etc), and general scoping of the market for primary issues. To be honest, I always thought DCM did whatever shit IBD didn't want to do - give the LevFin IBD analysts a Bberg or 2 and you wouldn't need teh DCM effort. The sales desk brings together the syndicate and works very closely with DCM. Loan trading isn't very exciting because they're very illiquid.

My advice: if you're going into IBD and want to do Lev Fin, then you'll be working some loan deals. An IBD analyst has a lot of interesting roles to play on this.

If you're going into fixed income, avoid DCM and loan S&T desks altoghether - you don't learn as much as you would somewhere else. Again, you just do shit that IBD doesn't do - lots of comps, lots of managing databases of potential syndicate members. PM me for more info.

 

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