Advice for Private Credit Case Study with ZERO EXPERIENCE

Based on the most helpful WSO content, here's what you need to know for tackling a Private Credit Case Study with zero experience:

Outline for Your Memo:

1. Loan Structure:

   • Leverage: Use information from similar LBOs to benchmark the target company. Look at leverage ratios, tranches, and pricing.
   • Interest Rates: Include details like L+xxx on term loans or x.xx% coupon on bonds.
   • Credit Rating: Assess the creditworthiness of the borrower.
   • OID (Original Issue Discount): Mention any discounts on the issuance of the loan.

2. Investment Summary:

   • Company Overview: Briefly describe the company, its industry, and market position.
   • Transaction Rationale: Explain why this investment makes sense, including strategic fit and potential returns.

3. Source & Uses:

   • Sources: Detail where the funds are coming from (e.g., equity, debt).
   • Uses: Explain how the funds will be used (e.g., acquisition, refinancing, working capital).

4. Risk & Mitigates:

   • Key Risks: Identify the main risks associated with the investment (e.g., market risk, operational risk).
   • Mitigation Strategies: Describe how these risks can be mitigated (e.g., covenants, collateral).

5. Follow-Up Due Diligence:

   • Additional Information Needed: List any further information required to complete the due diligence (e.g., detailed financials, management interviews).
   • Verification Steps: Outline steps to verify the information provided in the CIM (Confidential Information Memorandum).

Additional Tips:

• LBO Model: Even though it's not explicitly required, creating an LBO model can be beneficial. It will help you show the debt schedule and other key metrics, which can strengthen your pitch.
• Benchmarking: Use data from similar LBOs to make educated guesses on leverage, tranches, and pricing. This will make your assumptions more credible.
• Capital Markets Group: If you're at a larger firm, leverage your capital markets group for help with assumptions. At smaller firms, this might involve direct negotiations with lenders.

Resources:

• WSO Academy Courses: Consider taking relevant courses such as the LBO Modeling Course and Private Equity Interview Course to build your skills.
• WSO Free Modeling Series: Access free financial modeling lessons to get up to speed quickly.

By following this structured approach and utilizing available resources, you can effectively prepare your memo and impress the Investment Committee. Good luck!

Sources: LBOs - Why repay debt instead of keeping cash flow?, Private Credit Resources and Prep, Creating own LBO assumptions, Why do I have to pay for Cash needed for operations in an LBO, How to Convince My Boss to Include Excel Modeling Into the Job?