Technical Hardo: Infra vs RX
Deliberate clickbait title but not entirely dishonest as the thread may come across as somewhat immature.
Have received offers to lateral from two different teams (still as first year analyst, NYC). Like the teams and dealflow is good so it comes down to actual work (unsure about exits so not focused on that). Have just under 1 week to decide between them.
Context: I am drawn to both at the idea of them being technically more engaging and absorbing coming from a fairly vanilla team (Tech / C&R / HC / Industrials). However I do have a few questions.
Is restructuring mostly just “technical” in the sense of legalities technical? Or is it quantitative technical? With infra I at least have the clarity of the models involving a notion of quantitative technicalities and still a debt heavy focus (obviously performing and but not high yield) but the technical element being somewhat more quantitatively carved out in nature. As you can probably tell I am vying for the quantitative technical but not at the expense of going over the legal docs. So if RX will give me more number crunching (even if that means more legalese) then that is better and vice versa.
RX is a little more opaque because the first impression, surprisingly, I got from RX bankers when discussing this was along the lines of ‘infra being quite technical and potentially pigeonholing one’. Have seen quite a few posters here comment that the technicalities of RX arise more from the legalities (legal rules of the game) rather than any further / deeper layer of quantitative insight. Equally, there are (mostly/possibly junior) members posting about superior grasp of technicals etc. Is that mostly because of a lack of understanding of debt in most of the recruiting juniors which is being highlighted? Obviously I am simplifying for the nuances of the BK/RX processes here.
Finally, and of course no WSO thread is complete without this, would it be possible to move from one to the other at the end of 2-years if the one I opt for doesn’t seem like a good fit? From RX to Infra M&A or Infra M&A to RX, given the debt / technicals heavy focus of each?
I would read The Art of Distressed M&A and Moyer's book to get an idea of what you'll be dealing with. RX generally has great exits FWIW. Not too sure about infra. Just my anecdotal experience dealing with turnaround/distressed focused investors.
RX is very technical regarding the number of hours you'll be spending going over legal/credit documents. It also provides you more exposure to different models such as cap tables, liquidation waterfalls, etc. But just because these are different models doesn't mean they are better. If you foresee yourself hating your life researching legal docs and looking at shitty companies on the cusp of bankruptcy, then you shouldn't consider RX, regardless of how specialized it may be. Infra provides the same level of technical rigor across usually tax equity/project finance modeling but the same question arises. Do you actually enjoy infrastructure and could you see yourself not getting tired/bored of it? Also, making a move from either industry to the other just doesn’t make sense and isn’t optimal. Not saying it isn’t possible, but would say it’s probably easier to go RX to infra. TLDR: you shouldn't pick your move based on how technical/specialized it is but rather your own interests.
Thanks, OP here. When you say Cap Tables, are these not similar to what we have to do near the end of each M&A deal too as part of proceeds modelling / funds flow? I guess we don’t do liquidity roll-forwards, 13 week CF etc.
In terms of work, actually drawn to both (should have clarified in OP) but just wanted to see if any further colour could be had. Why would you say moving from RX to INFR could be easier than the other way round?
These are quite different groups. I would suggest your primary consideration being whether you truly enjoy infrastructure or credit more. As for legal docs, that’s such a fundamental aspect of RX work that getting into the weeds with them should be something you find interesting
Having been in RX, I feel like the quantitative technicals aren't that hard to learn. What's really valuable is to be able to sit in on calls and hear people talk about the lingo, see how people think, what sorts of things they consider. The daily exposure to that adds incremental knowledge of the different relationships, incentives, and motivations of each party - and really that's the main thing that you can't learn on your own.
I cover some infra names, and they all have fat cap stacks and their fair share of restructurings - even if you're not on the distressed side of things, you'll get exposure to the same credit technicals e.g. putting together large waterfalls, understanding financing structures, etc. You probably won't need to understand covenants that well, and you'll interact with different people day to day - but net net at the junior level I don't think it's a huge difference. Even if you go into RX, nobody expects you to be a legal expert as an analyst and going through credit docs won't make you an expert.
I think the main difference is really just the optics for headhunters - RX analysts will get first dibs at distressed seats. Infra will likely get best looks for infra funds. Doesn't make it impossible to switch between though; seems just like incremental effort and polishing your story.
OP here. Thank you, this is incredibly helpful especially the point about fat cap stacks. At the end of the day do not wish to miss out on learning about debt, ideally with an M&A angle. Feel like INFR addresses this point best but (admittedly) like most people of this generation wanted to see how the optionality might look like. The distress angle with RX is obviously appealing from a learning point of view but let’s see. In your RX experience, what sort of sectors most frequently presented themselves?
RX is good for optionality - there are fewer seats, so people will just assume you know more even though that might not necessarily be true. Not sure if infra has the same reputational benefits. In terms of sector, I worked on a combination of retail, energy, and sovereign / muni mandates - distress tends to be cyclical, so switches up every five to ten years or so.
Was in an infra group and things are very technical. The interviews I had for the group were: 1 technical round + 1 paper test, math, technical, reading, etc. + 1 round of case study + 1 round of DCF modeling test + 1 final behavioral interview.
You might spend a lot of time reading agreements as well, but the models cost the most time because it's a nightmare for a fresh grad/someone with a little bit of experience.
The models are usually monstrous. 20-30 tabs are the norm as well as 1000+ lines. The projects are somewhat interesting at first because you are working on court, toll road, jail, parking lot, etc. However, things don't get much exciting after your 5th or 10th deal just like all the other banking groups.
Quite a few terminologies for infra and new modeling concepts you need to learn.
Thanks - what made you leave?
Laid off because of covid. The company was terrible at handling the "covid-19 shock" because they are now so short of people.
When I was in infra I worked NA, LatAm, and EU markets, all over the board. Actually worked on more LatAm transactions than NA transactions.
Having looked at more than 5-10 deals in infra, it really comes down to your fund. Sounds like you've been looking at P3s (court and jails) and a bit of transport both of which tend to look fairly similar after a few reps (at least from a modeling standpoint). Most infra GPs aren't focused on just these two segments (in fact I'd say transport just doesn't have that many opportunities on the core side of things within North America) and tend to look at renewables, digital infra (this is where things get real interesting imo), logistics, social care, etc. so there tends to be a fair bit of diversity. Look at the stuff that guys like Antin, Tiger Infra and Digital Colony (to name a few) are doing.
Bottom line, if you wanna do Infra PE, go to a shop that is on the lookout for investments that may not be defined as Infra right now but could be down the road.
Echoing the above. The most interesting deals right now, at least in the energy transition space, are platform deals with the opportunity to development and build emerging greenfield infra assets.
Public Private Partnerships are a large but niche aspect of infrastructure development and investment. In North America, this will generally cover transportation and social infrastructure assets. There are several other verticals of infra including energy, renewables, power, digital such as broadband, fibre, and data centers, EVs, and more.
The definition of infrastructure has evolved from real assets that throw off contracted cash and can be financed with non recourse credit. Any company with a business model that centers around developing, owning, and / or operating real cashflow generation assets can be considered infrastructure.
Hey, can u elaborate a bit more on this comment? What about digital infra is unique/special?
Deal flow is really weak in RX now. I generally wouldn’t give this advice to someone recruiting from college, but if you’re lateraling today, im not sure it’s a great time to join RX.
OP here, thanks! Would you moving to RX from a debt heaving M&A team like INFR may be possible at the junior Associate / An3 level if I go with INFR now? Premature but any tips for best positioning my experience to aid this?
I mean. If you’re looking to hang around in banking for that long, then go ahead and take RX if that’s what you think you’ll want to do in 2-3 years. I perhaps mistakenly assumed that you (like nearly all analysts) want to move to the buyside by that time. The market will eventually cycle at some point, and default rates won’t stay this long forever, so if you like credit and want to stay in banking, then go for it.
If this is about optionality, I don’t know, I suppose you could make the switch down the road. Honestly, people would probably scratch their heads, and there would be a learning curve, but it seems possible
OP stop focusing on the ability to change jobs & resetting career to a specific unrelated niche ("Role #2"), in evaluating the value to you of starting a career in Role #1. Why are you looking to leave the second you get in? Your situation of having 2 options to choose from is modifying your thought process, creating "False Complexity" to the situation. Should be a simple approach: do your due diligence, make your decision, and go All-in on 1 or the other.
Restructuring offers you the broadest skillset to be able to secure interviews in the widest array of areas IMO (Direct Lending/Private Credit for one). Infrastructure is extremely niche, the financing is boring and unrelated to typical Corporate debt financings - it's 1 guy on the team focused on just those deals and his 1 go-to analyst spreading comps and data on that area. The modeling is niche - like that guy said 200 tabs.
If you wanna become an expert in Software that SUMs numbers and an array of data, and how to reference cells and numbers in a database across multiple sheets, and how to move numbers around in Excel - do modeling and Infrastructure. If you wanna move beyond that in skillset - do restructuring, and build off those skillsets and keep growing from there in other areas of interest and weakness.
and ppl please stop using the jargon "technicals" - what does that even mean. intentionally vague. In other words, technicals = knowledge and concepts and definitions of words or areas--that typically those looking to break into the industry have knowledge gaps in. Simple process to acquire that knowledge if you know where to source the content - read about those areas, see a few varying but similar examples, then analyze, understand concepts, and form conclusions . Nothing challenging about that vs. any other college textbook curriculum. So don't be spooked by "technicals"
Thanks, you are on point about worrying too much due to the optionality presented at this stage. I like the sector (Infra) but also like distressed. These are both based on what I have read of the areas and the people I have spoken to - the rest will be figured out on the actual job, as there is only so much one can learn in a short time without actually doing it. Which is where the question sort of comes in… will happily go ‘all in’ with whichever decision I make but before committing to one of the two prefer to get as much perspective as possible.
You mention the wide array of RX exits but realistically some trade off will need to be had (I mean I appreciate one cannot ‘have it all’). I don’t think my RX stint will position me favourably for Infra funds and similarly my Infra stint will likely not make me a certain candidate for distressed. Just trying to balance out which of the two leaves that little bit more margin for manoeuvrability.
Have you worked a lot in RX or mostly LevFin (have found a lot of your comments on other threads quite helpful). Was it pretty common to come across PU&I companies in RX?
(1) Have I worked in Restructuring or mostly Lev Fin? - both technically - had a couple good Rx experiences to intimately know the process. 1 Lev Fin left lead in particular - worked on it from Pitch to Closing of Term Loan B-->to Waiver, Forbearance to Ch. 7 Bankruptcy Filing - so I saw the whole restructuring process and was an initially active, then semi-active participant. Also had deal site access & got email updates on literally all corporate lending deals for the bank - investment grade to leveraged to restructuring/bankruptcy deals - so I dug into the docs a bit there on some names and literally had endless content to learn. Also had auto deal access to all GS CS MS BAML Lev Fin deals - so that was helpful for comps, and interesting to just open the LP and see what the story is. Not an expert in Rx per se, but have enough knowledge to advise on skillset and key deliverables in the role, etc. Not an expert at this moment T=0, but if I really wanted to focus and learn the space, I could do it in idk...2 weeks or so?. Let's put it this way - "I know what I don't know". And have an idea of how to learn what I don't know.
(2) Instracture Rx deals - not sure. But method I would use to answer your own question is (1) Secure database of Rx/Bankruptcy deals and firms on "watchlist", (2) Filter by Industry. There's deals in every industry I'm sure. Why are you so gung ho on this space? Do you want me to send you a Power and Electricity Primer or something?
Agreed. the best money managers in corporate securities understand fulcrum securities and can nimbly/opportunistically price opportunities/securities across the capital structure (including off balance sheet liabilities and assets). do not pigeon hole yourself.
https://turnaround.org/sites/default/files/11.%20Paper%20-Caesars.pdf
https://www.hbs.edu/faculty/Pages/item.aspx?num=58107
does RX banking really get that involved in the legal documents? isnt that what the lawyers are for? or is it the same type of "everyone doing same work and charging client for it several times over" kind of thing?
working in RX consulting there were quite a few times where i found myself doing same thing id have expected (and they infact did turn out to be doing) the bank advisory firm to be doing.
yes. legal docs skillset is a big plus in this space and in lev fin. How are you supposed to advise client? Just take the lawyers word for it and have no clue what they're taking about. You wanna have enough knowledge - really in any space you export to 3rd party - to be able to challenge and ADD to a dynamic conversation
In my experience, RX bankers sometimes have better advice than counsel does because they are full circle. They understand the full dynamics behind the business and how that impacts the legal end. Even $$$ counsel will sometimes just say ridiculous things that make no sense operationally. Bankers do too sometimes...but not nearly as often as lawyers. :)
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