Special Situations / Distressed Recruiting
Could anyone provide insight on Special Situations / Distressed Recruiting?
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Also interested for what it's worth...
I mean it's going to be the same process with headhunters reaching out and giving you opportunities to interview. Some funds I've seen hire out of banking, although most roles I've seen have people who have either worked previously at a distressed fund / have done a couple of years of PE before. The fund I work / worked at, and the funds I know of, mostly had people with the IB+PE / IB+previous HF progression. I was lucky to land a seat while skipping a lot of those steps, so it's possible to land a seat by skipping steps in some way I guess. As with other recruiting, being at a top group / fund would obviously help. However, knowing the right people will help more and might make it easier. I know people who jumped from mid sized funds to Anchorage / DK / Centerbridges of the world because their PM put in a good word and they had good networks (mine was similar to this).
Re interviews, it's very important you know why you want to do distressed / special sits investing. It's of course very relevant now so just walking in and saying that you got interested because of the environment isn't going to cut it. Have a case / idea you can discuss well - don't need a formal pitch but just some general situation you know or can talk about to show that you understand how to evaluate and talk about investing in the space. That will help you move on to the next stages. I did get some technical questions but those will usually be easy - you can do those well if you read and understand moyer / have previous IB / PE / investing exp. Hardest part would be case study - you have to show you can actually turnaround a case and come up with some recommendation. Again, focus is on how you think about and evaluate opportunities - what do you think about the biz / assets? would you buy now? why? If not, why / when? what are the risks / catalyts? upside / downside? You need to be able to justify your answers with conviction.
Happy to answer any specific questions but at the end of the day it all comes down to you being able to show interest in distressed / special sits, talk intelligently about the opportunities you see, and do well on the case study.
Would you guys be open to people from backgrounds in the private credit space? Investing across the cap structure (senior, mezz, and equity) with experience in restructuring and bankruptcies of portco’s and special sits investing? Been at my NY based fund for 3 years in and looking at potential exit oops
Talking to headhunters would be your best bet. I haven't seen any with your background at the funds I know of / have worked at. That being said, given your experience, you should get looks from funds it seems
Thanks for the response. Is it really that rare then to exit straight to a distressed fund? Wouldn’t those funds look for RX or LevFin? What about if you’re in M&A, would that stand a chance?
It's not that rare. More and more funds are hiring straight out of banking
Not rare to exit straight to a distressed fund. I'm sure some of the guys from good RX groups exit to distressed funds every year; however, most of the guys I've seen have done some combination of IB / PE or IB / HF prior but more funds are hiring out of banking now too
Hi - Sorry to slightly hijack the thread but I have a RX/Distressed Case Study coming up and have been cramming the Distressed Debt Analysis Moyer book and one thing I was curious about was how do you go about determining the leverage of a distressed issuer post reorg since it has such a large impact on recoveries?
Is that a combination of comps leverage levels, leverage pre-crisis or what the cash flows can afford to service in a "new normal" situation?
Thanks in advance!
You spread comparable Debt/EBITDA multiples to determine a proxy for the level of debt that the company can service (essentially right-sizing the balance sheet given the target's current EBITDA performance). That should give you the baseline for what a recap should amount to. Also have to review liquidity projections to evaluate ability to service debts and what cash needs are. You can structure a recap applying any combination of debt securities and mixing up the PIK vs. cash interest pay components of any given debt instrument as well.
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