I wanted to get the opinion of those with more restructuring experience on whether it's worth trying a creditor-side (non-UCC) project after spending the last 2.5+ years exclusively on the debtor side.
What I enjoy about debtor work:
- The feeling of being "in it together" with management and working toward saving the company.
- The opportunity to build financial modeling, forecasting, and analytical skills that would be useful if I ever pursued a CFO-type role.
- The mix of strategic, financial, and operational work. Every engagement phase feels a little different, which can keep things interesting.
Why I'm considering trying the creditor side:
- Management teams can be great, but they can also be difficult or outright incompetent, which can be frustrating when you're trying to get data or just do your job properly.
- Debtor-side projects tend to be long. Sometimes it's nice to move on to a different company, situation, and group of people.
- I've heard creditor-side work is more aligned with thinking like an investor and less focused on building hyper-detailed operating models.
The last point is the biggest one for me. I enjoy modeling and analysis, but I've found debtor-side teams often spend a lot of time building extremely detailed forecasts for items that may still be directionally correct with simpler assumptions. I'm generally a believer in the Pareto Principle and prefer focusing analytical effort on the handful of drivers that truly move the outcome.
For those who've worked both sides, is that characterization of creditor work accurate? Is the modeling and analysis more investment-oriented, or is that overstated? I've also heard WLB can be somewhat better on the creditor side, but I'm not sure how true that is in practice.
I don't see myself moving away from debtor work entirely because I genuinely enjoy it, but after doing it for a few years I'm curious whether the grass is actually greener on the other side.
Appreciate any thoughts!
Regarding extremely detailed forecasts, I’m not a RX consultant but I’ve heard from people that are that the reason it’s done is because you cannot afford to drop the ball on anything. Similar to how in PE you model everything out, every little scenario even if it may not be useful, because if you don’t and the IC committee asks about it you look incompetent. In RX, the models you build aren’t being analyzed by an IC, it’s being analyzed by everyone (management, creditors, judges, lawyers, bankers etc). So it’s best to build it to a level of detail at which point you cannot add any more detail, else you’ll be stuck with endlessly refining it. Very counter intuitive. Unlike the PE situation though, in RX the granularity is actually helpful because you can count on each row in the model getting atleast one pair of eyes on it.
Debtor side is more fun in my opinion but I’d say creditor work at times can be more like sitting in an investing role if you are representing the fulcrum security. Representing the ABL of a cap stack is typically incredibly boring.
Think this would be better in the consulting forum no?
probably got sent to the gulag based on creditor/debtor words
I had posted it in the consulting forum. Not sure why it got moved here.
If it is just one project and you can move back to debtor after, I don't see the downside in exploring a creditor side engagement. I was recently trying to make a similar decision but it would have involved moving to a 90% creditor side firm, with less flexibility to go back to debtor. The primary reason I was looking for a change was less travel, but I was able to work something out with my current firm to limit travel and ultimately decided to stay. But I found these WSO threads helpful when trying to make the decision
https://www.wallstreetoasis.com/forum/consulting/at-the-point-where-i-get-to-choose-creditor-or-debtor-for-rx
https://www.wallstreetoasis.com/forum/consulting/guide-to-creditor-side-rx-consulting
https://www.wallstreetoasis.com/forum/consulting/debtor-vs-creditor-vs-ucc-for-rx-consulting
I've answered a couple of similar questions on the consulting forum, since I used to do mostly creditor side RX consulting, and my recommendation is to definitely try it out, if you have the optionality of returning to debtor side, should you not like creditor side work.
The work is fundamentally different from debtor side work; you're less so building deep business plans, 13wcfs etc, and having really deep conversations with management, and more so interpreting the models the debtor side consultants provide you with, walking your clients through them, and then getting (or trying to get) your creditor(s) to agree on a single path of action, whether it be providing additional financing or whatever. Depending on what group of creditors you're representing, you'll have to build appropriate models. If it's a PE firm, you'll most likely build / play a large part in building or adjusting an LBO, and so on. Some other examples are credit bidding & new money models, because the senior secureds could end up realizing they won't get their cash back, so they decide to take ownership of the company (a "loan-to-own" strategy) via a credit bid, or they are asked to fund a RO to inject fresh capital. And so you end up building models to calculate their projected IRR on that new capital compared to simply taking a haircut and walking away. Another (albeit niche) one would be a NOL preservation model because when a company reorganizes, it often wipes out debt, generating Cancellation of Debt Income. If your clients are taking equity in the reorganized company, they probably care a whole lot about the company's future tax shield. So you model out the debtor's NOL to see how much CODI they can absorb, which in turn impacts the value of the new equity your clients are receiving. So yes, the work is generally more investing oriented, but the debtor side professionals can absolutely build the aforementioned models as well; they're just asked to do so less often. I know debtor side people who have built LBOs etc.
It's also a deeply relationship based and people business. When you have a bunch of creditors, it's not easy getting them in a single line. Also, the debtor side professionals rarely give you exactly what you ask for, so there's that. Despite all that, I really liked it, mostly due to less travel, and relatively less workload than the debtor side guys. You also can stack on multiple creditor side deals at once, and the time you spend on them is relatively short compared to debtor side. Both debtor and creditor teach you how to think like an investor, it's just that debtor teaches you to be more of a realist as opposed to creditor, which teaches you to be more of an optimist. For better or worse, the PE firms of the world like optimists more...though realists would probably be more effective.
Thanks, this is exactly the perspective I was looking for.
I feel like my situation is a bit odd in that the way I think is probably more aligned with the creditor side of the work, but my ideal exit (if I ultimately decide consulting isn't for me) would probably be something on the corporate finance/operator side.
One thing I've been wrestling with is how much value extremely detailed financial models actually add. Don't get me wrong, they can be helpful for sure, but I've found that, in many distressed situations, the biggest source of forecast error isn't the mechanics of the model; it's the underlying assumptions.
For example:
Maybe that's just a function of the situations I've been exposed to so far, but it's something I've been thinking about.
With that in mind, I had two follow-up questions:
Thanks again for the help!
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