hi there - if anyone had experience on a case study for a private credit shop (DL especially). Any advice or insights would be helpful.
I assumed it would be very like LBO in terms of financial modeling part. some questions though:
1. as credit investors, if the products are mostly unitranche and first lien - will waterfall the same as traditional LBO? (eg. catchup and 80-20)
2. assumed the focus will be more on leverage and coverage ratios etc. will the model still need to calculate IRR?
3. what will normally be included in due diligence part. (heard that there will be a presentation after the modeling in later stage of the interview)
thanks in advance. any comments are welcome!
Yes it's 90% of the time like an LBO, Waterfall is the same as for an LBO, my rule of thumb - they usually ask you what structure makes sense, just go for a unitranche at 60% LTV and make sure your interest coverage is over 1.5x to have some headroom - this works in 95% of cases, just double check it makes sense but that's what I go for.
On 2) it depends, sometimes you do but it's not really a difficult addition to the model to be honest, you already have Net Debt, so just add EV calc based on Entry EV/EBITDA multiple, substract ND to get to EqV, and just get the IRR. Takes 2 mins to implement.
thank you vm for the reply! you mind me DM you. Cause tbh it's my first case study, I have been working in trading and research side.
can't send you DM. some follow-up questions pls..
1. will they normally give you term sheets for debts in a case study, and you need to build the debt structure by following the terms (coupon and repayment etc)? how complex would it be about the covenant part.
2. I assumed that you have to make assumptions to margin growth etc in order to project financials. are those assumptions very tailored or you just do average of the historical growth rate for example
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