JPM, BAML, CS. I believe JPM, GS and MS levFin groups are more capital markets oriented where as baml and CS do hold the pen on their own models. While I think it’s great to have the modeling experience, I know of analysts from the more capital markets oriented LevFin groups who have places to great funds. but as far as I know, outside of jpm, both baml and CS have strong LF businesses.

 

I might be a little bit off here with the terminology but all leverage loans and US banks are regulated by the Fed. There are certain guidelines to doing deals like not leveraging above 6x etc. Jefferies doesn’t fall in the category that gets regulated. so they have been able to help sponsors with really aggressive deals and have been able to climb up the league tables in 2017 and 2018. I think they were top 5 from a league table perspective in both bond and LL. Jefferies LF is well known on the street...

 

correct. explained well w/o knowing the specific terminology. and it’s the result of Shared National Committee’s (SNC) Leveraged Lending Guidance in 2013.

Non-bank arranger = jefferies as a result, non bank arrangers gained share. then even PE firms created underwriting arms - KKR Cerberus Apollo etc - like I can UW and make a 2.0-2.25% fee on 1L term loan and 2.5-2.75% on 2L? sure why not. then came the rise of Direct Lenders etc etc happy to provide some publications and whatnot on these topics

 
Most Helpful

Compehensive list of BB LevFin Groups that model and that do not:

LevFin Groups that DO NOT model: GS, MS, JPM, Citi, Barclays LevFin Groups that DO model: BAML, CS, DB, UBS

Some misc. notes: - BAML LevFin modeling is mostly cash flow modeling. The coverage group will build out the operating model (revenue / expense assumptions) and the LevFin group will take those inputs and run it through their debt repayment model, tweaking the assumptions (mainly leverage and pricing) and other cash flow related items (taxes, capex, working capital etc). While the LevFin person does still need to understand the operating model assumptions in order to stress test it, just note that the actual operating build (which I would say is the key part to actually understanding how a company runs) is done by the coverage / M&A group, not LevFin. - CS splits their LevFin team into 2 groups - Financial Sponsors and LFO&R. Sponsors does all work related to private equity firms (LBOs, refis for portfolio companies, div recaps etc) whereas LFO&R only does work for standalone / non-sponsor backed corporates (mainly refis, repricings, first time new issuances). From what I know, LFO&R splits the model work similar to BAML (coverage holds pen on operating model, levfin holds pen on debt repayment model) whereas Fin Sponsors runs the entire model solo. - UBS combines both their Fin Sponsors & LevFin group into one. Holds pen on entire model, and they are focused almost exclusively on sponsor-backed deals (they actively avoid regular corporate deals that - while great for HY league table credit - are balance sheet heavy). In my opinion one of the more underrated groups out there, despite the WSO population generally looking down on anything UBS-affiliated for some reason. - The non-modeling capital markets groups literally do not touch the model at all. The closest you will get to modeling in those groups is building a sources & uses and pro forma cap - the whole model component will be run by your M&A / Coverage groups. Your work at the analyst level will mainly consist of building cap tables, spreading debt comps (pricing / leverage), updating market update slides, and if you're really good, covenant comps, commitment paper negotiations, funds flows (for lead left deals). Note that because of the lack of modeling, the non-model LevFin groups generally have better hours compared to their respective coverage groups.

Hope this helps

Array
 

Comment about CS is slightly off.

CS breaks it into 3 groups:

  • LFO&R: see comments above. Also do a lot of buyside m&a financings and general structural advisory. The origination part is important to. They have their own book of business and go out and win deals. It’s not like some LevFin groups (JPM) where LevFin only works on deals that they get introduced to via another group that sourced it. On the restructuring end — DIP/rescue financings and some advisory (when permitted)

  • LevFin capital markets: Not seen as a traditional banking group. As the name implies, the handle a lot of the capital markets support work on LFO&R deals. This group doesn’t model or originate and they have fantastic hours lol

  • Financial sponsors: See comments above. Really strong group and the culture is great. Only criticism is that a lot of the processes worked on in this group are very repetitive/similar, so some say you leave without a very well-rounded skill set. Debatable.

General info: - Great deal flow across the board because LevFin is the core of CS IB - FSG and LFO&R have the best PE placement of any groups at the bank

 

I just replied to another similar question/comment which should answer your queries - feel free to read that.

Re. CS, LevFin is mixed with the sponsors groups and so is slightly more of a relationship management team than other teams, so here is also not as good as other teams for learning modelling but you still pick up some and develop a strong understanding of the debt space so you’re fine for exits. Just prep modelling case studies on the side.

 

CS Levfin is not mixed with Sponsors. They are two completely separate groups. Both groups model extensively and are not just "relationship managers". Not sure where you got that info lol. They are some of the most technically-demanding groups in the bank. LFO&R naturally will have some more complexity given the nature of the processes they work on

 

Analyst at one of these firms so here's my experience on it. We do touch and usually hold the pen on the LBO based on the assumptions from the operating model. The bulk of our work is usually not about valuation - and I think that most PE guys don't really care about valuation (ie pay 10x or 11x) but rather what are they key things about the business. Whilst we do not build the operating model we use it intensively to change assumptions and have different senarios (I have once basically changed all the assumptions from the industry team that had a very optimistic outlook vs our view - deal was travel related, guess what our view was the better one). This allows us to get a good grasp of the business we are working on even if we didn't do the 3 statements (and honestly if you've done it once its not that hard). We also focus a lot on all the one-offs costs/earnings and dirty to clean EBITDA that will be a key point for negociation with lenders. These skills are usually appreciated by PE funds as it includes negociating and understanding of some niche things.

I think lack exposure to M&A process stuff, Equity valuation (not really sure how its negociated, driven other than basic comps, what to look out for in a DCF, who knows maybe these guys don't care about clean EBITDA???) and merger accounting. I am not gonna lie I have no clue for all of these (aside from basic finance knowledge), the latter 2 sound quite cool and I want to developp that skillset in PE (former we deal with that frequently and I'm fine with process in general as it is needed at some point).

Final point that I will add, LevFin is the only team in a bank (excluding ECM/DCM but these have no solid exits) that can loose money as we commit capital and even sometimes hold tranches in the deals we execute. So as bankers, we not only have to advise clients but also think about the credit itself and therefore we have a view on things that will be usually more cautious, critical than your typical industry banker that just wants the deal to go through. We on the other hand want the deal to go through and be a good deal as we don't only have our reputation at stake but also $$$. Can be quite a sell to HHs to say that you are in essence already putting capital at risk.

 
Controversial

All your points are very correct but unfortunately you will see that it’s a lot harder than you think to exit in non-debt roles.

Modelling aside, you will notice that M&A guys end up being a lot better prepared than you just because (I) they will think differently (upside vs downside protection), (II) they have more experience looking at companies in details (in levfin you only go through the high level, that’s a reality) and (iii) they know valuation a lot better as you pointed out (and yes, valuation does matter a lot in PE.... understanding cycles, building a proper EV to EqV bridge are very important skills needed on the day to day)

There is also a reason why PE funds now hire a lot of consultants - operating knowledge / operational understanding does matter in this job and ultimately you are more likely to get some in a consulting or in a M&A / coverage role rather than in a financing one

Just want to make sure that there is no misinformation here: LevFin groups do give you great exposure and learning but they will NOT position you better for EQUITY buy side exits

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