Loan types?

So a juice loan is when you charge someone interest, the "vig", at a usurious rate, such as 1-5% weekly. They may never pay the principal back, but you've got a steady income stream while they get it together. Better yet, should they default to you, you can typically use it as a way to claw into their assets. Maybe it's as simple as they sell the car and pay you, but if they're a restaurant owner or something you can take ownership in their business and even potentially use it to conduct fraudulent activities, all in the name of getting your money back. Of course, if somebody fails to pay your juice loan, you show up to their mother's house and batter that old woman with a steel chair. Intimidation is key. Rumor has it there's an MD at Baird that collects roughly $25K a week in juice payments alone from his analysts. Lot of junior bankers over there walking around with eye patches and peg legs. Be careful before you take the juice.

Do I need to know it if for a career in IB? If you’re aiming to do LevFin, absolutely. If you’re shooting for a career in ECM then it’s not as mandatory. Either way, it sounds like you’re interested and educating yourself on something you’re interested in will always serve you well.

Tons of content and resources online that you can learn from….S&P Leveraged Loan Primer has a wealth of info that I’d personally recommend.

I’d also suggest you affirm your understanding of capital structures and the basics of how bankruptcy works (Chp 7 Liquidation, who gets paid out first and why). Doing so will give you a great idea of what types of returns different lenders aim for and why they employ certain strategies in line with their risk appetite (ex: Corporate Bank extending RCF vs HF investing in Mezz Debt).

I’ll answer some:

1L vs 2L - First lien has first dibs on collateral value, second lien only is secured to the extent that any collateral value remains after 1L is fully paid. Their claim is subordinate to the 1L lender despite being secured by the same collateral.

PIK means payment in kind. In other words, interest isn’t paid in cash but paid “in-kind” so the interest amount accrues on the principal balance of the debt.

FV of debt - debt is just a contractual cash flow. The credit agreement will tell you what those cash flows will be and when they will occur. There’s a few approaches to determine an appropriate discount rate but a FV estimator would need to apply a discount rate to figure out the PV of those CFs outlined in the credit agreement or bond indenture, brining you to the Fair value of the debt.

Things can get complicated when talking about “subordinated”…. holdco vs opco, subsidiary guarantors, etc … that S&P lev loan primer will give you a great start

I'll answer some:1L vs 2L - First lien has first dibs on collateral value, second lien only is secured to the extent that any collateral value remains after 1L is fully paid. Their claim is subordinate to the 1L lender despite being secured by the same collateral.PIK means payment in kind. In other words, interest isn't paid in cash but paid "in-kind" so the interest amount accrues on the principal balance of the debt.FV of debt - debt is just a contractual cash flow. The credit agreement will tell you what those cash flows will be and when they will occur. There's a few approaches to determine an appropriate discount rate but a FV estimator would need to apply a discount rate to figure out the PV of those CFs outlined in the credit agreement or bond indenture, brining you to the Fair value of the debt.Things can get complicated when talking about "subordinated"…. holdco vs opco, subsidiary guarantors, etc … that S&P lev loan primer will give you a great start on all this stuff

The Handbook of Fixed Income by Fabozzi is the Bible. Fixed income investments by Stuart Veale is good.

And, as I've told new analysts coming in always, Google and Investopedia are your best friends

I work in structured products, have traded pre crisis rmbs up to regular CLOs, ABS, CMOs, done collateralized debt financing, so as these structures can be confusing AF, these helped me starting out and I still use them 8 yrs later

There are all kinds of resources available online and in books that others have mentioned.  The most important things to understand about debt are the security level / type, the structure of contractual payments, contractual terms and market valuation.

Security level / type is how the loan is collateralized and where it sits in the cap stack.  1L (first lien) loans typically have a first lien on all of the assets, i.e. in the event of a bankruptcy they would be paid out first.  2L (second lien) loans typically have a second claim on the assets, i.e. after the 1L debt is paid down then the 2L gets whatever is left over up to its full value.  Loans can also be collateralized directly by certain assets like a home mortgage, i.e. for a drilling company for example a loan may have the rigs or vessels as collateral.  Some loans have equity pledged as collateral.  This debt is called 'secured' in that the loan is secured by the assets of the company.  In the event of a bankruptcy this has the possibility for getting muddy as many capital structures may not be as straightforward as simply taking the value and distributing it straightforwardly down the waterfall.  But as a banker that isn't working in bankruptcy you wouldn't really need to get into those details.

The structure of contractual payments are how the interest and amortization payments are structured.  Some loans are amortizing and some aren't.  Amortization means that the company is obliged to pay a certain amount of the principal down.  For example, a $1m loan with 1% principal amort per year would be required to pay $10,000 per year in principal payments.  While the principal outstanding would go down, the amort amount is defined by the face value of the loan, so despite the principal amount going down, the borrower would still be paying $10,000 per year.  Interest payments can be cash, PIK or a combination thereof.  PIK payments are just non-cash payments of debt with additional debt.  Many loans that pay PIK have both a cash and a PIK component.

Contractual terms would be anything specific to the loan that the company is obliged to satisfy.  The most relevant for you in this section would be covenants.  Covenants are typically financial ratios that the company must satisfy to not be in default on the loan.  For example, a net leverage covenant would state that throughout the life of the loan the company can't exceed a net leverage level of a certain amount.  Cov-lite is an industry term that just means that a loan agreement doesn't have a lot of restrictive covenants in it.  It's good for the borrower and bad for the lender.

Market valuation is just how the loans are trading, what their price is, and what the yield is.  For a true market valuation of a company's enterprise value you should calculate the value of the debt based on its market price, not on the face value of the loan.  However most bankers don't do this because they're dealing with highly rated companies whose debt is typically trading around par.  In a bankruptcy scenario, where you can have debt trading down into the 30's or below, say, the market value of debt becomes much more relevant.  But if you're not going into RX you don't really need to know that.

There are all kinds of other things that debt advisory / lev fin / restructuring bankers need to know about (basket size / availability, restrictions on what you can do with the debt, rules in the credit agreement on how it can be modified, etc.) but a typical coverage banker isn't going to need to know those things.  Usually the only way you'll really deal with debt as a coverage banker is calling up your lev fin desk to ask them to give you a leverage read on inputs for an LBO model.  With that being said, you should be able to understand what a company's cap structure looks like and how to model out the debt schedule at a high level.

Cov light is typically preferred equity vs. a senior loan