I’m a VP in corporate banking within the healthcare sector, happy to answer any questions regarding credit facilities, treasury, relationship management, developing relationships with traditional m&a or ecm investment bankers, etc.
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I have been in corporate banking for about six years.
When I have seen people exit (which is at a much lower frequency than traditional IB due to a difference in culture), it has primarily been to alternative credit funds, private equity, traditional IB, and treasury positions at a corporate. The talent model in corporate banking is less "churn'n'burn" and is much more about keeping people long term. Hours are significantly better and there are many fewer "kiss-the-ring" types.
What is the exact difference between corporate and investment banking? My understanding is that both do debt issuance for companies, but investment banking also advises on M&A etc.
The big difference is corporate banking takes the lead on "traditional banking products." That includes the actual underwriting of credit exposure, deposits, treasury management, etc. Investment banking, on the other hand, takes the lead in securities and advisory.
Let's use buyside M&A as an example. While the investment banker is the guy that is advising the client on who to buy, how to value them, etc., the corporate banker is the guy that will actually be underwriting the financing of the acquisition. For instance. When Microsoft acquired LinkedIn, the advising banks got advisory fees but also provided a very hefty loan to Microsoft to complete the acquisition. The corporate banker is the one that actually runs the internal process for the bank to write that check.
If we go down the path of a more traditional loan, say $1B revolving line of credit to ABC Company, the corporate banker is underwriting the credit and structuring the deal, whereas the investment banker is recruiting other banks to join the syndication.
I'll be "that guy".
Can you offer expected comp / hours at the An1 Through VP levels? And how homogeneous they would be at other banks (BB if you're in BB, etc).
Furthermore what are the skillsets you'd most likely be looking for from someone lateraling in at the Associate / Sr. Analyst level without much CB experience in their past.
Thanks!
Analysts come in around $80k base (15-20% bonus target), associates around $125k (40% bonus), VPs around $175k (50% bonus). I think probably fairly comparable to the other BBs.
Skillset is basically identical to IB, with a heavy emphasis on modeling and quantitative analysis. That said, you will spend much more time in Microsoft Word than Microsoft Powerpoint when compared to IB, as you spend a ton of time writing credit screens, memos, etc.
it’s always knowing your way around a model, knowing your accounting, and being able to explain the levers to pull in your assumptions
Sorry do you mind just clarifying what you mean by the "being able to explain the levers to pull in your assumptions" part? Did you mean like explaining why you used a certain growth rate and discount rate in a given year?
Also, for accounting, do you think I should study the super detailed stuff like pension accounting, FX rate effects, NOLs, and DTAs?
Also - sorry for so many questions - how detailed do you think I need to go in learning debt paydown and LBOs?
Thank you in advance - I really appreciate the advice.
Assuming you’re looking at larger credits, but I’m gonna take a stab anyway. Have a few questions as I’m interviewing with a MM Direct Lender and only have experience with BSL. Here are my questions 1. How do bankers size/structure revolvers? Do you guys use guidelines as in like a % of the total credit facility (i.e. revolver should be around 25-35% of the entire senior part of the cap structure? 2. What sort of maintenance covenant level is typical in the MM - let’s say I have Sr. TL. with closing leverage or 4.5x. How should I think about setting the maintnenance covenant level? 3. Are you guys just using standardized market terms to determine incremental facilities capacity or is there more of an art to that? 4. How much variance is there in mandatory prepayments provisions in your market? In BSL, it’s typically 100% of asset sales and 100% of debt issuance subject to leverage levels. Wondering if there’s a fundamentally better way to think about this. 5. How do you guys think about structuring restricted payments baskets?
I only have experience in the BSL market so a lot of these terms are standardized and you rarely see covenants. If you have any insight would be much appreciated!
1) The big banks have general guidelines around total leverage given by the regulators. The sizing of the revolver when compared to the term loan really depends on the needs of the company and the use of proceeds. Revolvers are really for working capital, short term needs. Term loans are for CapEx and acquisitions. Overall, the big banks prefer to keep total leverage (debt to ebitda) under 4x, but they will go above that threshold for the right companies and the right situations.
2) Typically you will have a leverage covenant and a cash flow covenant (say fixed charge ratio or something similar). every bank approaches covenants differently, but the main hope is to try to serve as an early trigger to faltering performance. As such, for a loan that closed at 4.5x, we may have a covenant at 5.0x and steps down to 4.5x or 4.0x over time as the company grows into projections.
3) Standard market terms are most prevalent for deals with investment grade companies. Once you get into junk grade or non-graded then it becomes much more of an art.
4) Mandatory prepayments, or automatic defaults, are going to be fairly standard. If there is a full ownership change, large asset sale (could be as low as 10-20% of total assets), change in management, etc. the banks will want the option to demand full repayment. Then it just comes down to the individual situations and relationships.