Hi WSO,
I'm starting at a direct lender this week. I'm on the investment team and I look at sourced potential investments and judge ability to pay based on credit worthiness of the business, value collateral and the activities the loan will be used for and then price the loan and assign basic terms prior to underwriting. We deal with small businesses so detecting fraud or money laundering is a pressing concern, too.
What can I lateral into from here? Is a special situations group or a distressed HF or distressed PE possible? Would I have to try to get into IB?
My previous job was as an analyst in an oil company. Nobody understands the downstream despite the billions there since E&P is so lucrative but downstream still made a pretty penny when oil prices fell so that got the majors attention.
Depends, but not really.
Most direct lending firms these days mostly lend to sponsored transactions (i.e. a PE firm wants to acquire an asset and need to apply leverage). You piggy back some/most of your knowledge and research off the work that the PE firm has already commissioned (i.e. Quality of Earnings, Industry research, etc.) and done.
I would argue you see more deals and have the opportunity to close more deals than a PE firm does as a direct lender given theoretically you have the opportunity to see many deals with many different PE firms. You also don't necessarily need to "get all the way there" to close a deal - many direct lending firms are thrown into the loop and given 2-3 weeks to put forth terms and make a decision and will end up closing the deals because they feel they have boxed in or priced most/all their primary risks with the deal and place trust in the PE firm/management team for the remaining open questions they have outstanding. The sponsored direct lending space is highly competitive.
PE vs Direct Lending are pretty different in their own regards. If you prefer direct lending over PE, one might say, "I enjoy looking at different capital structures and figuring out ways to uniquely structure a transaction, whether that be through a mezzanine structure, 1st lien stretch, unitranche, etc."