Asset-Backed Finance & Capital Markets Exit Ops from BB

Have an offer from a BB/borderline BB (think UBS, Wells, RBC, etc.) Wondering whether to pursue asset-backed finance or something in the capital markets division. My main concern here is the exit ops -- what kind of career opportunities does someone coming from asset-backed finance or ECM/DCM have?

Any input would be much appreciated -- have to decide soon

 

I think he's referring to Asset backed lending in terms of revolver and term loan? Head of my department at a BB makes no more than 500k... More exit opps with capital market... I don't even consider asset-backed lending apart of capital market for BB.

 
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@WCBC60" I think for sake of clarity you're going to need to specify ABLending or AB Securitization if you want to get a straight answer.

If it's the former, you're looking at highest on the capital stack/senior secured lending/borrowing base derivatives. Tends to be focused on middle market companies or large caps that have fallen from grace and need liquidity that can no longer tap the cap markets. Depending on your bank's risk appetite you could see some pretty cool stuff. It's a lot more intensive than just drag and drop with a % factor. Exit ops really depend on the company/industry, ive seen people leave for direct lenders, lateral to other banks, and even one guy who went to an RX shop.

If its the latter, uhhh I'm sure there are people better equipped than me to help you with that.

 

I came from Capital Markets (LevFin - DCM & Syndicate) at a BB. Was there for 3 years. I was interested in investing and ended up becoming an investment analyst and a multi-strat credit hedge fund (focus on CLOs, direct lending and distressed).

Other analysts / associates in my group went to classic investment banking, buy-side cap markets, PE and private credit investing. Plenty of exit opps, you just need to work hard to get your foot in the door for the final interview. The typical knock I got was that I didn't model in cap markets (which was true, but also has plenty of strengths that counter that).

 

The most helpful arguements were experience through volume of transactions in cap markets and understanding of relative value. In 3 years I worked on ~75 transactions across bonds and leverage loans (multi currency) in 4 different industries. Most bankers don’t have that type of experience through repetitions which gave me an edge.

Regarding relative value, it was very helpful in HF interviews showing why I’d buy X over Y with similar yields given risk profile of each name (transaction experience helped here again).

 

Yes. We will explain.

Imagine you are a one-person consulting shop. You want to take a new company with no operating history and no management team public.

You do this with no vc or mezzanine funding. You just go straight to the capital markets. You don't sell equity. Instead, you sell 1/2 billion dollars in investment-grade corporate bonds where about 1/3 of them are AAA rated.

You use contract management to outsource almost all of the administrative aspects of the firm. Your buying power permits you to own and manage a vast portfolio of premium commercial real estate assets using no commercial lending facilities. You are a cash buyer.

That, is a superpower.

Degrees
 

There are many factors in play for exit opportunities within ABS. ABS will definitely teach you how to evaluate a pool of loans, and the process behind including which ones into the securitization, dealing with the legal risks, setting up the SPV, linking the pool with middle/back-offices, etc.

The exit opportunities in this field are specialized, and also dependent on which assets you have exposure to. Normally, you will have an easy time exiting to companies that originate the assets you are working with:

  • If you securitize auto loans, you'll have an easy time working for an auto company in their financing group. For Student Loans, a place like SOFI will probably love to have you. You get the idea.

Outside of the above, insurance companies, pension funds, and asset managing firms have ABS desks. There are also a few really good ABS research desks on the street (MS, Wells Fargo, JP). Overall, the exit opportunities aren't aren't as varied as in other parts of finance, mainly due to the steep learning curve of the product and the assets being securitized.

 

Not to bring up an old post, BUT, if one's skillset is mainly centered around evaluating pools of loans (and all the associated modeling/processes around it) would an exit to a hedge fund/AM firm/Family Office be feasible? Specifically one that may make investments in SPVs of loan pools in the form of senior (term or delayed draw term) or mezz loans?

What about transitioning to something like Credit PE? 

What advice would you have for someone early in their career who's skillset is mainly evaluating loan pools? 

Would it be realistic to go from evaluating loan pools --> credit hedge fund/credit PE etc. --> MBA --> RX?

 

I think making the transition is difficult because you're not really working with different debt types. You're only concerned with the assets, cash flows(showing under different circumstances how different tranches will pay down, and legal risks that lawyers are taking care of 99% of the time.

I recommend you lateral into a corporate group to get corp fin experience. Then you'll have an advantage and understand how to use securitization as a form of financing, which can be useful considering ABS get higher ratings, resulting in a lower cost of financing. PE firms want someone that can analyze a company by themselves, and not understanding accounting means you can't do that. 

The only exceptions are complicated asset classes (RMBS,CMBS,aircraft) where firms heavily rely on people with a securitization skillset. For these asset classes, corporate finance experience is not really helpful (there are exceptions).

I think I wrote a post about this in my comment history.

 

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