Q&A: I'm a London-based Distressed Debt Analyst

I did 1 year at one of the top restructuring shops (BX, HL, Moelis etc) and then moved on to a credit fund. I've been here for 1.5 years and love every minute of it. We've historically focused on the distressed/special sits (control and non-control) space but given the drought of opportunities (in our opinion, some funds would disagree) out there we've expanded our investment mandate and now also look at performing HY/leveraged loans.

I remember when I was still in IB I found it hard to get info on how buyside recruiting/buyside life works in London as most of the info on the internet is American-centric.

If you have any questions about restructuring, credit investing, recruiting etc. feel free to shoot them my way.

Comments (70)

Dec 19, 2014 - 9:13am
oreos, what's your opinion? Comment below:

You looking at Takko?

"After you work on Wall Street it’s a choice, would you rather work at McDonalds or on the sell-side? I would choose McDonalds over the sell-side.” - David Tepper
Dec 19, 2014 - 9:28am
sa-jue, what's your opinion? Comment below:

How do you look at distressed situations, ie what's your process in terms of analysis and how deep does the fin analysis go? What are / were the most useful materials for you to prepare for interviews at your current shop? Thanks

Dec 19, 2014 - 9:28am
sa-jue, what's your opinion? Comment below:

How do you look at distressed situations, ie what's your process in terms of analysis and how deep does the fin analysis go? What are / were the most useful materials for you to prepare for interviews at your current shop? Thanks

Dec 19, 2014 - 9:29am
vulture-fund2015, what's your opinion? Comment below:

Not me personally but we've been following the situation for a while. we've lost enough money on another fashion retailer this year (i'll let you guess which one that is) so I think we're going to tread carefully on this one. are you?

Dec 19, 2014 - 10:09am
oreos, what's your opinion? Comment below:
vulture-fund2015:

Not me personally but we've been following the situation for a while. we've lost enough money on another fashion retailer this year (i'll let you guess which one that is) so I think we're going to tread carefully on this one.
are you?

Vivarte? Yea, been following it for a while, no one has got brave and dipped their toe in yet from what we've seen. I hate retail so i can't blame them and given it is a bet on mgmt turning the business around, seeing the CFO walk out because he doesn't want any personal liability associated with a german RXing isn't great.

"After you work on Wall Street it’s a choice, would you rather work at McDonalds or on the sell-side? I would choose McDonalds over the sell-side.” - David Tepper
  • 1
Dec 19, 2014 - 10:24am
vulture-fund2015, what's your opinion? Comment below:

No, on my level I'm the only one with a restructuring background. We certainly like to hire people with RX background but other things (e.g. languages and personality) are more important, and we're a small fund so we need people to tick multiple boxes. Most of my peers were in lev fin and to a lesser extent industry groups at BBs.

Also we tend to hire people with more experience (c. 3-4 years - I got lucky and was sort of an exception) and the good RX people usually get scooped up after 1-2 years.

Dec 19, 2014 - 9:42am
Gcredit, what's your opinion? Comment below:

Thanks for doing this:

  1. How would you compare the role of an analyst in your kind of fund (assuming something like Oaktree) v/s a more market related ops like CQS in London? Both types do corporate HY so really interested in finding out real differences.

  2. I spent decent time at a $10bn+ fund researching equities but wasn't going anywhere in terms of deep analysis so accepted another opportunity which has nothing to do with investing but did expose me to the debt side of things. At times I regret leaving the buy-side as people on the street don't recognise my brand anymore. But if I was still with the same firm they'd respond quickly as we were fairly big in euro equities and had that respect. It's stupid.

Some of the sell-side guys I've met so far tell me that to be a desk analyst on the markets side, they prefer someone with experience. I'm surprised that even as entry level sell-side positions they want people with 1 years exp. Why so? I get corp HY is demanding and my equity exp may not be as relevant but anything else you can think of.

Funny thing is, they recommend not going to my previous fund as I will not learn much so kinda of stuck!

Best Response
Dec 19, 2014 - 10:37am
vulture-fund2015, what's your opinion? Comment below:

Well I can't really comment on what it's like to work for a fund like CQS. I will say that having a fund with locked up capital makes life a lot easier because you don't have to worry about redemptions and therefore can take a much longer view with regards to your investments. I'm guessing that at more hedgie type funds you're spending a lot of time on next quarter's EBITDA will be above or below guidance and to me that sounds horribly boring/pointless. locked up capital also lets us exploit special opportunities, e.g. when Vivarte went into freefall you saw a ripple effect throughout the European leveraged loan space because CLOs had to indiscriminately sell off assets for no fundamental reasons. we had the capital to step in. distressed investing is all about benefitting from forced sellers and I'm not sure to what extent multi-strat funds can exploit that.

with regards to the second question, I have no idea to be honest. my only guess is that to be a desk analyst they want you to be uptospeed on the market and the lingo. i.e. when I speak to a desk analyst and ask him whether he thinks this credit will have a Phones4U-style outcome I expect him to understand what I'm referring to. for someone who has not been exposed to the HY/distressed scene that might be an issue. again, though, it's difficult for me to understand your position and as a result give you advice.

Dec 19, 2014 - 10:45am
Gcredit, what's your opinion? Comment below:
vulture-fund2015:

Well I can't really comment on what it's like to work for a fund like CQS. I will say that having a fund with locked up capital makes life a lot easier because you don't have to worry about redemptions and therefore can take a much longer view with regards to your investments. I'm guessing that at more hedgie type funds you're spending a lot of time on next quarter's EBITDA will be above or below guidance and to me that sounds horribly boring/pointless.
locked up capital also lets us exploit special opportunities, e.g. when Vivarte went into freefall you saw a ripple effect throughout the European leveraged loan space because CLOs had to indiscriminately sell off assets for no fundamental reasons. we had the capital to step in. distressed investing is all about benefitting from forced sellers and I'm not sure to what extent multi-strat funds can exploit that.

with regards to the second question, I have no idea to be honest. my only guess is that to be a desk analyst they want you to be uptospeed on the market and the lingo. i.e. when I speak to a desk analyst and ask him whether he thinks this credit will have a Phones4U-style outcome I expect him to understand what I'm referring to. for someone who has not been exposed to the HY/distressed scene that might be an issue. again, though, it's difficult for me to understand your position and as a result give you advice.

No actually that's a good answer. I've asked my PM the same question and his answer was we do focus constantly on next quarter results (or even next few days) but its mainly to profit from these situations. Investments tend to be long term nonetheless. So we made tons of money on a number of longs over a period of 1.5 years but percentage position/weight in the portfolio changed around earnings which was a good kick for me.

Dec 19, 2014 - 11:18am
oreos, what's your opinion? Comment below:
vulture-fund2015:
. when I speak to a desk analyst and ask him whether he thinks this credit will have a Phones4U-style outcome I expect him to understand what I'm referring to. for someone who has not been exposed to the HY/distressed scene that might be an issue. again, though, it's difficult for me to understand your position and as a result give you advice.
we should be friends........called a short on phones in may (difficult to get the borrow though)
"After you work on Wall Street it’s a choice, would you rather work at McDonalds or on the sell-side? I would choose McDonalds over the sell-side.” - David Tepper
  • 1
Dec 19, 2014 - 10:10am
AndyLouis, what's your opinion? Comment below:

thanks for doing this, just added to frontpage so you'll see more questions start to roll in

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Dec 19, 2014 - 10:39am
sa-jue, what's your opinion? Comment below:

thanks - anything that was v helpful for your interview preparation?

Dec 19, 2014 - 11:07am
vulture-fund2015, what's your opinion? Comment below:

know your deals in and out. make sure you understand the business well. it is important to know the deal dynamics etc. but more important that you understand the business. is it a good business? how do they make money (this seems like the easiest question in the world but you'd be surprised how many interviewees struggle to answer it even though they could name you the formula in cell AF885 of the restructuring model by heart) who are the major customers? what are their margins? what are their competitors' margins? why are they lower/higher?

you can read moyer and graham and buffet but ultimately I think doing well in interviews comes down to (a) showing motivation, (b) being able to talk about your deals and (c) luck and perhaps most importantly fits.

If you have time and motivation consider doing a mock case study (print yourself the OM and the latest annual/interim reports) of a HY issuer of your choice and lock yourself in a room for 4 hours. build a model and articulate whether you would buy the bonds or not. if you have a friend who does the same you can quiz each other.

Dec 19, 2014 - 11:29am
sa-jue, what's your opinion? Comment below:

tx - have done mocks and find it most difficult to i) find right multiple for business value to determine where value breaks and fulcrum security is and ii) model out P&L drivers detailed within those 4 hours - any recommendations on those 2 points?

Dec 19, 2014 - 11:29am
sa-jue, what's your opinion? Comment below:

tx - have done mocks and find it most difficult to i) find right multiple for business value to determine where value breaks and fulcrum security is and ii) model out P&L drivers detailed within those 4 hours - any recommendations on those 2 points?

Dec 19, 2014 - 12:13pm
above_and_beyond, what's your opinion? Comment below:

Thanks for doing this OP.

I'm interested in the distressed debt space and wanted to ask for some recommendations on how to jump from a US boutique (think EVR, GHL, PWP, MC) in London to a distressed debt fund. I'm mostly doing M&A but still have some exposure to RX although I'm lagging large "brand-name" RX transactions. Did you contact headhunters, or did they contact you? Any resources (webpages) or headhunters you used in particular? Is it important to network with funds? Is being a native German speaker a plus or are they looking for Spaniards / Italians / Greek / etc.?

Cheers!

Dec 19, 2014 - 1:43pm
vulture-fund2015, what's your opinion? Comment below:

HH reached out to me but if you work at one of the shops you mentioned you should have no problems getting traction with them even if you reach out to them. Agreed re Hinton. German is definitely a plus - it's always been Spanish, Italian and German in order of preference since I've been in this industry.

@sa-jue. no one expects you to build a full-blown model in 4 hours. do what you can but more importantly have an answer to the question "how would you have done this if you had more time"

Dec 19, 2014 - 12:22pm
GBB_19NHS, what's your opinion? Comment below:

Hinton Rose, reach out to them. German native is always a plus though recently more focus on Spanish / Italian

"too good to be true"

See my WSO Blog

Dec 19, 2014 - 12:25pm
kpmonkey, what's your opinion? Comment below:

Thanks for this OP, very hard to find information here specifically for London. I have sent you a pm.

Dec 19, 2014 - 3:02pm
Cries, what's your opinion? Comment below:

Did you do your RX analyst gig in London as well? or did you relocate from the states?

If you relo'd, how did you go about? Is it possible for a US analyst (in a seat that sounds surprisingly the same as yours) to get hired in London w/o already being there?

Array

  • 1
Dec 19, 2014 - 3:55pm
volatilebob, what's your opinion? Comment below:

Thank you for doing this - I am London based and starting off in a top boutique.

If I were interested in credit funds / distressed funds would you recommend being in the generalist restructuring team or a sector specific m&a team? Would there be any preference for an analyst from either of these areas.

  • Associate 2 in CorpFin
Dec 19, 2014 - 7:47pm
vulture-fund2015:

I did 1 year at one of the top restructuring shops (BX, HL, Moelis etc) and then moved on to a credit fund. I've been here for 1.5 years and love every minute of it. We've historically focused on the distressed/special sits (control and non-control) space but given the drought of opportunities (in our opinion, some funds would disagree) out there we've expanded our investment mandate and now also look at performing HY/leveraged loans.

I remember when I was still in IB I found it hard to get info on how buyside recruiting/buyside life works in London as most of the info on the internet is American-centric.

If you have any questions about restructuring, credit investing, recruiting etc. feel free to shoot them my way.

is there anything you would advise someone who is about to Big 4 Audit ACA qualify and wants to switch to Big 4 restructuring? There are a lot of restructuring books but they are USA based, dont know if they are relevant. Do you know if there are restructuring based excel courses you know of?

Would you advise that i focus on making jump to Big 4 restructuring first then try move to IB based restructuring shop like your previous one? Have you seen any examples of that?

Have you worked with Big 4 restructuring shops during your career? Is there any difference between what they do vs Banks? From what I understand its v.different to USA where they are very accounting based.

thanks for any help.

Dec 21, 2014 - 7:27pm
vulture-fund2015, what's your opinion? Comment below:

I'm not aware of any excel courses or books about European restructuring. many of the law firms publish case studies about the restructurings they worked on, that might be helpful. I've never worked with a big 4 restructuring group and I have no idea what it's like to work for them, sorry

Dec 20, 2014 - 5:20am
UKUndergrad, what's your opinion? Comment below:

Are languages about as important at HFs as they are in banking, or more important?

Banking recruitment at the intern/grad level normally implies "We'll hire you for your brains and fit and if you have languages that is a big plus" but for HFs is it more "We'll hire you for your brains, fit, experience, and languages"?

i.e. I only speak English - how tough will it be if I have brains/fit/experience?

Dec 21, 2014 - 7:24pm
vulture-fund2015, what's your opinion? Comment below:

It's doable. There will be fewer opportunities as a lot of times a fund is looking to fill a particular language need so you won't get invited to those interviews. However, plenty of times they're just looking for someone smart and a language is nice to have but not essential. it's not something you can change anyways so pointless to worry about. I'm not a native English speaker but my native language is about equally useful as Swahili and I did fine.

Dec 21, 2014 - 9:39am
Bacon_macaroni, what's your opinion? Comment below:

Thanks for doing this, OP.

Is it possible for people who have HY credit analysis background to get into distressed? I'm currently working at a hy credit fund but we only look at those that are public on the market, I'm more interested in distressed/special situation/non-liquid type of opportunities. I don't have a banking background (started on the buy side), what would you say are the best ways for someone with this background to get into distressed debt?

Thanks!

Dec 21, 2014 - 7:29pm
vulture-fund2015, what's your opinion? Comment below:

yeah I'm sure that's doable. HY/distressed isn't that different for the most part. maybe read moyer and Whitman to give you an idea what distressed investing is like but be aware that in Europe it's different. I think the best way for you to get into distressed debt is just to reach out to headhunters. out of curiousity though why do you want to do non-liquid type of opportunities? most people I know want to go from illiquid to liquid.

Jan 2, 2015 - 7:59pm
Bacon_macaroni, what's your opinion? Comment below:
vulture-fund2015:

yeah I'm sure that's doable. HY/distressed isn't that different for the most part. maybe read moyer and Whitman to give you an idea what distressed investing is like but be aware that in Europe it's different. I think the best way for you to get into distressed debt is just to reach out to headhunters. out of curiousity though why do you want to do non-liquid type of opportunities? most people I know want to go from illiquid to liquid.

Hi vulture-fund2015: Im interested to go for the non-liquid type opportunities because i think they are more complex, offer more opportunities for in-depth analysis, and their alphas are less dependent on market swing etc... Would you mind sharing why the people you know want to go from illiquid to liquid? is it because there are more liquid HY bonds than illiquid opportunities? Thanks!

Dec 21, 2014 - 12:10pm
WallStreetHope, what's your opinion? Comment below:
  1. Have you realized that with the recent and abrupt change in Crude prices that there has been a lack of understanding or knowledge about the energy space? Just based on the fact that there hasn't a real presence of distressed energy companies in recent years.

  2. What's the best advice you can give someone who wants to break into distressed, from an EM/HY/IG role?

Thanks!

Dec 21, 2014 - 8:17pm
ProminentMonk, what's your opinion? Comment below:

Many thanks for doing this, appreciate your help. I'm currently a BB analyst at a regional office in southern europe (think FR/IT/SP). Id say ive had above average exposure in terms of complex M&A both in buy sides and sell sides but have 0 experience in debt restructuring. What kind of approach would you recommend if i was thinking of mating with headhunters in 1 year or so?

Dec 21, 2014 - 8:17pm
ProminentMonk, what's your opinion? Comment below:

Many thanks for doing this, appreciate your help. I'm currently a BB analyst at a regional office in southern europe (think FR/IT/SP). Id say ive had above average exposure in terms of complex M&A both in buy sides and sell sides but have 0 experience in debt restructuring. What kind of approach would you recommend if i was thinking of mating with headhunters in 1 year or so?

Dec 23, 2014 - 6:44am
vulture-fund2015, what's your opinion? Comment below:

I don't think 'mating' is the ideal choice of words here and I also don't understand the broader question. If you're asking me how to reach out to headhunters, I wouldn't overthink it. Just drop them a few lines with your background and interest and attach a CV.

Dec 22, 2014 - 8:38am
aspharagus, what's your opinion? Comment below:

Hey there

What readings would you recommend other than Moyer 's Distressed Debt Analaysis and distressed-debt-investing.com website?

In terms of other idea generation, anywhere forums/websites to recommend other than Distressed Debt Investor's club (DDIC) ?

Dec 22, 2014 - 9:15am
oreos, what's your opinion? Comment below:

http://www.amazon.co.uk/gp/aw/d/1905783655/ref=redir_mdp_mobile/279-7629924-9132053

Best book on European restructuring. Not perfect by any means.

"After you work on Wall Street it’s a choice, would you rather work at McDonalds or on the sell-side? I would choose McDonalds over the sell-side.” - David Tepper
Dec 23, 2014 - 4:51pm
njokes, what's your opinion? Comment below:

Out of interest what kind of ballpark is your base salary in please?

Dec 27, 2014 - 7:58am
corto maltese, what's your opinion? Comment below:

Thanks a lot for doing this. Would you mind sharing very ballpark figures of how comps look at different levels of seniority for analysts (not PM) at your fund (or similar - base + bonus). Just trying to understand how comp looks like on the buy-side, not that much info around for Europe. Also, does the level of seniority matter at all or would a 2nd year analyst get the same comp as say 1st year associate when joining?

Dec 31, 2014 - 10:03am
Murut, what's your opinion? Comment below:
corto maltese:

Thanks a lot for doing this. Would you mind sharing very ballpark figures of how comps look at different levels of seniority for analysts (not PM) at your fund (or similar - base + bonus). Just trying to understand how comp looks like on the buy-side, not that much info around for Europe. Also, does the level of seniority matter at all or would a 2nd year analyst get the same comp as say 1st year associate when joining?

Figured vulturefund may understandably not be so keen to talk about his specific (firm's) comp so thought I'd jump in. At the junior end of things it can vary a lot i.e. basic salary of anything from £55-100k. I would stress, however, that those higher numbers are rare with only two or three places paying that. The average definitely sits around £70k. With regard to bonus what most places do is say that if you work hard and do a good job you will get something around 100% of your base - it's not your job to generate profit for the fund initially, it's to learn, so it's a bit unfair to peg your bonus to fund performance. Going forward you may get a bit of a bump in basic salary now and again but there doesn't tend to be a specific track as in banking, instead it will be your bonus number that will increase if you do well. For example, in your second year you're still really learning but you could get something around 120%, for example. Year three and onwards it very much depends on how good you are and what fund you work for.

Most places will not differentiate between Analyst 2 vs Associate 1, for example; both are seen as junior individuals with no experience of investing so tend to be brought in on the same level. I would say that most funds prefer to avoid making people take a paycut so maybe the Associate would get a fractionally higher base depending on what level they were at and what the fund typically pays incoming analysts. Still, the overwhelming consensus is that one should not be focussed on your first year's comp - it is about the learning opportunity and there is an obvious dislocation in what you can earn in a fund over future years compared with staying in banking anyway. Consequently if someone is making a fuss about wanting their new basic salary to be £5-10k higher than what is offered then they are probably missing the point.

Jan 1, 2015 - 6:40am
corto maltese, what's your opinion? Comment below:

Thanks a lot for the answer, will sb when i can. I think I read somewhere that junior bankers were taking paycuts to join credit funds, but 70k is more or less in line with 1st year associate so I guess that's pretty fair. I also agree that early comp doesnt matter too much, but its still nice to know you don't have to take a big paycut to your base salary. How high is the turnover for junior analysts in general? I've heard its pretty brutal at some places like Millenium, was wondering if thats specific to multi-strat funds or if its also similarat credit funds.

Jan 1, 2015 - 3:03pm
Waving Wind, what's your opinion? Comment below:

Which firms are considered leading players in the distressed debt space (in London)? Also, given the popularity of distressed debt investing, do you feel as if the space is growing overly crowded? Heard this is getting increasingly true for illiquid credit.

DYEL
Jan 8, 2015 - 4:02pm
floppity, what's your opinion? Comment below:

Are there any particular writeups or online resources that you would recommend reading for distressed? I'd be particularly interested in a piece that could flesh out the details for events that could occur in a distressed situation and how to in a sense prepare for them.

My boss has a background in distressed and was able to walk me through the details of a pretty onerous exchange offer that we had to go through last year that kind of came out of nowhere, however, I'd like to be able to do it without as much hand holding in future cases. The lawyers working on the docs must be in the office 24/7 to do so many revisions. My previous background was entirely equities, so spending a portion of my time looking at bonds in the 70 - 90 price range has been rather interesting to put it simply.

Jan 17, 2015 - 11:16am
dossier, what's your opinion? Comment below:

Which sellside distressed desks do you rate and which sellside distressed analysts do you talk to the most? Thanks for the thread!

Feb 8, 2015 - 8:09am
humdog12, what's your opinion? Comment below:

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