Hey guys - I have a restructuring interview with a boutique investment bank (HL, Roth, GHL, Gugg) for a lateral associate position. I was wondering if any Rx guys can give me a heads up on what type of questions to prepare for. Will they be looking for deal experience or will this be a technical grilling/fit.
Thanks
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Hi bankingguy1995, check out these threads:
Hope that helps.
My experience lateraling at the associate level at one of the shops you mention was 1) minimal but not zero deal discussion 2) heavy emphasis on technical questions (specifically around modeling/valuation and credit/documentation) 3) heavy emphasis on “why banking” and “why here”
I thought the HL case study was great for the RX specific questions and the YouTube series (11 parts) “mini course in restructuring” was good for a high level review of some ideas in Moyer and worth checking out.
never got around to thanking you for this. Much appreciated sir
Nice of you to elaborate, @Fastbreak. Care to expand upon documentation? Are you talking about review of debentures, credit agreements, and plan of reorganizations? And with credit, are you referring to credit metrics and the like?
Sure, happy to. I’ll try to make an outline from the types of questions I’ve been asked.
Documentation: -Types of seniority (structural, temporal, contractual) -Levers that exist within documents to allow companies to access additional liquidity (DDTL, committed revolvers, debt baskets) -Provisions that would prevent companies from accessing liquidity or raising new funds -Provisions that could limit operations (permitted capex, permitted expenditures) -Covenants (financial covenants, maintenance covenants, incurrence covenants) -As a potential lender, how to approach a distressed situation and what might make it attractive / what protections would get you comfortable to lend to rescue the company -Provisions that could generate additional returns for junior debt holders (PIK, penny warrants) -Options to refi if not 100% of lenders consent -Restrictions for companies selling assets (generally must be at FMV, may have to be used to pay down secured debt, may be forbidden if part of collateral to secured lenders)
Credit: -Red flags for potential earnings manipulation -Drivers to increase cash generation in a business (cost normalization, outsourcing, headcount reduction, off market leases/rent) -How to calculate EBITDA -How to normalize EBITDA to comps (owned versus leased property = rent expense, cost normalization = add back non normal costs of distressed company to evaluate as a restructured going concern) -Calculate FCF (know how to get to both UFCF and LFCF) -Calculate EV (know that equity can’t be negative so if EV is face value of debt then your debt must be impaired and trading at discount, also know the 3 statement effect of this and how to calculate the implied debt prices) -Holding period return -Approximate bond price given coupon, maturity and yield -Effects of various restatements on EBITDA -Liquidity and cash flow ratios -Valuation methods -DCF inputs (Rosenbaum DCF chapter summarized for free on YouTube, ~1.5 hour video)
Other than those I have been asked brain teasers, market questions, questions on distressed situations I’m following and some of the standard accounting / 3 statement questions from IB interviews.
I’ll give you a couple good nuggets without too much text:
review J crew case study and similar case studies
think of creative drop down and other transaction structures to lower a company’s cost of capital
review leveraged finance covs like: RP baskets, debt incurrence, and some others.
be able to est. YTM for a bond if given inputs (mental calc)
know your transactions in and out (should go without saying)
then send me a thank you message
Thank you, sir.
fastbreak Thanks for your insights, I find it unique that you actively chose to jump from direct lending to RX when usually people go the other way around, just a couple follow up question if you don't mind
Thanks again
It is definitely more unique to go TO the sellside so I’m happy to elaborate some more. It ultimately just came down to interest for me - I think distressed credits are interesting and banking ended up being the place where I could find the most high profile role.
I used a mix of all of these. I think LinkedIn matches company jobsites 99% of the time and usually has additional options (including roles posted anonymously by headhunters). I did a lot of networking directly with companies (with a decent but not great response rate) and with headhunters directly. I had a few friends from university in the industry who helped me prep as well. I ultimately got my role after a headhunter I knew made an introduction to my bank.
The hours are brutal. I think on average associates expect ~75 hours a week in RX but I have been hovering above/below 100. COVID has really led to an unprecedented number of both pitches and active deals since revenue for a lot of companies essentially stopped overnight. It’s interesting work, but keep in mind restructuring deadlines are important since missing something could lead to filing.
I’m not decided, so I haven’t been married to one or the other at this point. I think banking is more stable in the long run but there’s also a risk-reward with pay, especially once you hit a level where you earn carry. I’m not sure the argument that funds have better hours holds a ton of weight (especially in distressed), but some might. One very important thing for me is culture, and I have really liked having a group chat full of analysts and associates to commiserate with. I think it could be a lot lonelier at a fund without big junior classes so the hours might be shorter but harder to get through. I’m lucky that my bank has a lot of MDs who are respectful and appreciative to the junior employees.
I thought many RX firms have so much work that they are literally turning down deals because they don't have the bandwidth to execute. Is that not the case at your firm re: the unprecedented pitches?
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