How to talk about deals

Based on the most helpful WSO content, here are some pointers and methodologies for discussing deals in a Private Credit/Direct Lending (DL) interview:

Key Points to Cover When Discussing Deals:

1. Deal Overview:

   • Type of Deal: Describe the nature of the deal (e.g., venture lending, syndicated, mezzanine, senior, junior, unitranche, special situations).
   • Role: Clearly state your role and responsibilities in the deal.
   • Objective: Explain the primary objective of the deal and the rationale behind it.

2. Financial Analysis:

   • Cash Flow Analysis: Emphasize your understanding of cash flow, as it is foundational in credit risk and DL.
   • Credit Metrics: Discuss key credit metrics you analyzed, such as leverage ratios, interest coverage ratios, and liquidity ratios.
   • Downside Scenarios: Explain how you created and assessed downside scenarios and the solutions proposed for the lender in those cases.

3. Credit Agreements:

   • Documentation: Highlight your experience with reviewing and understanding credit agreements. Mention any specific clauses or terms you focused on (e.g., sunset clauses, ROFO vs. ROFR, MFN clauses).
   • Legal Documentation: Show your familiarity with the legal documentation governing debt investments.

4. Due Diligence:

   • Borrower Analysis: Describe your process for conducting due diligence on the borrowing entity, including financial health, ownership, and potential risks.
   • Sponsor Analysis: Ensure the sponsor is credible and the borrowing entity owns the title.

5. Investment Committees:

   • Participation: Mention your involvement in investment committees, listening to questions, and noting which answers were effective.

Tips for Highlighting Commonalities Between Credit Risk and DL:

1. Credit Mindset:

   • Emphasize that the credit mindset is crucial in both credit risk and DL. Highlight your ability to assess creditworthiness and manage risk.

2. Regulatory Environment:

   • Discuss your understanding of the regulatory environment and how it impacts risk-taking and lending practices.

3. Analytical Skills:

   • Showcase your strong analytical skills, particularly in financial modeling, debt repayment scenarios, and leverage analysis.

4. Documentation and Agreements:

   • Highlight your experience with credit agreements and legal documentation, which is relevant in both fields.

5. Risk Management:

   • Explain your approach to risk management and how it aligns with the objectives of a DL fund.

Additional Resources:

• Books and Guides:
  • Moyer's "Distressed Debt Analysis" for a perspective on credit lens.
  • S&P's Leveraged Loan Primer (available as a free PDF).
  • "Private Debt: Opportunities in Corporate Direct Lending" for insights into the private debt space.

By focusing on these key points and drawing parallels between your experience in credit risk and the requirements of a DL role, you can effectively communicate your suitability for the position. Good luck with your interview!

Sources: Q&A : Credit (DL, SSG), Private Credit / Direct Lending Comp, Private Credit Interview Advice, Private Credit / Direct Lending Comp, Private Credit is Paradise