What's work experience like in Direct Lending?
I recently accepted an offer to join a Direct Lending team for MM LBOs at a Japanese bank (SMBC, Mizuho, MUFG). Not very familiar with the credit side, and trying to understand the type of technical work I'll be doing and what the field might demand of me. Also trying to get an idea about exit opps.
Would really appreciate any insights! Thanks.
Based on the most helpful WSO content, here's what you need to know about work experience in Direct Lending and potential exit opportunities:
Work Experience in Direct Lending:
Technical Work:
Skillsets:
Exit Opportunities:
Staying in Direct Lending:
Transition to Private Equity (PE):
Credit Hedge Funds or Distressed Debt Funds:
Leveraged Finance:
Compensation:
Key Takeaways:
If you have any more specific questions or need further details, feel free to ask!
Sources: Private Debt/Direct Lending Exit Opps?, Leveraged Finance – 2017 Update, Venture Debt/Lending Industry and Career Opportunities, Credit Funds: Differing Skillsets, Leveraged Finance Exit Opportunities
Will depend on what you're coming in as and the level of due diligence the team does. Some firms are more relationship driven so you won't really do as much deep DD while others will do more PE-style DD. I'm honestly not familiar if banks' DL teams lean one way or the other.
Assuming you'll be an analyst/associate, then you'll likely be modeling, identifying risks/mitigants, reading through VDR files, hopping on DD calls with the sponsor and management, etc. You'll also be putting together credit memos likely to present at some sort of investment committee. This will be an amalgamation of the model, DD, etc. Probably not a ton of legal/technical work with respect to structuring (as this will more likely be VP level responsibilities), but you'll likely need a basic understanding of structure and covenants.
An important point is to think like a credit investor (i.e. be risk-averse). Don't rely fully on the sell side reports as they're often overly optimistic. You'll probably have to think a lot about downside protection (equity cushion, collateral base, downside case modeling, etc.)
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