Aug 01, 2023

Direct Lending Internship Superday

I recently was chosen to participate in a super day for a 2024 SA program in direct lending and wanted some insight as to what I can expect in terms of technical questions. I assume I will be asked financial statement-related questions, maybe 5 C's of credit, knowing key financial ratios, etc. What else should I get very familiar with going into this super day?

 
Most Helpful

Think a lot of students looking at direct lending overestimate the role of credit metrics in investment analysis. Things like interest coverage and leverage are check boxes rather than drivers of investment decision (outside of stressed/distressed situations). What you really need to grasp is the business itself. In no particular order, market resilience/growth outlook, competitive positioning, customer concentration/dynamics, contract structures (what pricing power does the business have?), supplier concentration, fixed cost base.

every business/segment is different but as a general rule I always try to pin down what would drive margin compression in a business. Is there commodity/materials exposure, skilled workforce (wage inflation), expansion into unproven geos, etc. etc.

Good luck hope this helps

 

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