Origination vs Capital Markets
I know that banks like CS and BofA have two different teams within Lev Fin (origination vs capital markets). Can someone please explain the difference? Are the roles combined at certain banks unlike CS and BofA? Does this also apply in DCM? I would appreciate the insight.
I would imagine origination is deal origination, winning bake offs and underwriting the amount of leverage to be kicked over to the capital markets team to then sell to the public. I could be wrong tho.
CM group likely securitizes and registers the debt for public sale, manages/hires the syndicate to assist in the public offering process
Hey @minimonkey - appreciate your efforts n passion to comment in helping others in the space. You are almost there with your analysis and I get what you are trying to say, but some of the terminology you use makes pieces erroneous and may confuse people (sell to the public, securitize, bake off, etc.). Appreciate your efforts and happy to connect offline and show you some killer insights to improve your Lev fin knowledge. Just think someone in Origination or Leveraged Finance Capital markets would answer differently
All Cap Markets teams are split between a capital markets desk (aka syndication desk) and an origination pod.
The syndicate desk will speak with teh S&T and buyside guys to get a view on the demand/pricing for securities (as well as running the syndication process that is to speak to investors and run the book when in market for a deal) - 90-95% of their job is done just on BBG looking at current trading levels and chatting shit in BBG chats.
Whilst the origination part will do the more typical banker role that is pitching, structuring, diligencing and running the deal / process (aka churn excel analyses and PPT pages and call notes).
As someone who’s in origination, this is 100% accurate. In my origination seat, we pitch, structure snd market and syndication builds the book/works w/ sales. We handle investor requests/documentation etc
Hey I'm interested in going the DCM path but not sure if origination or syndication suits me better – could you please elaborate a bit more on what exactly goes into the structuring work that the origination team does? Does it involve any modeling?
Any insight you have on what goes into "building the book" that the syndicate desk does would be helpful as well. Thanks.
Here's the breakdown:
Origination: This is the group that will own the relationship with the client from the debt side of things. They will be constantly talking with the client (in addition to work with the industry coverage team member) about what kind of strategy / capital structure is best for the client. This could be a wide range of things, such as for operational needs (revolvers / term loans / regular debt finance) as well as M&A activity. It is up to the team on Origination to analyze, model, and suggest an optimal capital structure for the Client and Company.
For DCM/Syndicate: They are the market pulse for the origination team. Anything related to market rates, volume, investor demand, (basically ALL things market related as seen on CNBC) will come from DCM/Syndicate. Anytime an interest loan is pitched to a client, say the origination banker wants to show a 5% coupon on a high yield bond, will need to be approved by DCM. It is the job of DCM to relay realistic and practical interest rates that the Client can raise debt at. Once in market, that's where syndicate comes in to play, as they speak directly with investors and gauge investor demand.
there's a good overview on lifeandlevfin that goes through the nitty gritty. even their beginner page is pretty insightful
Do you know if this is the case too with IG DCM? I have seen banks like I mentioned that split lev fin between origination and CM but I haven’t really seen for IG DCM.
Yes, but in most cases syndicate desks only have VP+ roles so you never see junior roles opening / no one is going to reach out to you about it.
IG DCM is super easy because anyone and their mothers are going to want to hold Apple AAA+ bonds. Most of this demand for IG bonds comes from pensions, insurance funds, CLO funds, 'mandated' funds that need to risk out their portfolio so demand is always there
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