Hi all,
I have a case study interview at a direct lender coming up shortly and wondered if I could ask fellow WSO followers on what to expect and how to think about laying out my presentation.
I think that the transaction will likely be a buy-and-build play or a carve out, and would have a significant capex facility.
I come from a debt advisory background and so whilst I feel that I have a good grasp on fundamentals of companies / credit metrics, I have less experience in 'structuring a transaction' from a lenders' perspective. This will obviously be key point of the case study and so any additional guidance on structuring / analysing debt capacity would be greatly appreciated.
Secondly, I wanted to get people's view on FCCR covenants. I've never actually seen this in one of my deals (the joy of cov-lite), and wondered how this has been calculated in the past? (I have seen DSCR and IC covenants) There seems to be a number of differences in the definitions that I have read.
Thank you in advance, Dave
following
Hmm... I'll attempt to tackle this. Your questions aren't super specific, but I'd expect a CIM and then you build a model + a 3-5 page write-up. Quick background, investment merits, risks & mitigants, and brief model outputs. In terms of structuring, it'll be firm specific. Try to figure out where the firm invests in the cap structure, what rates they typically recieve, etc. and base it off that. Another idea is to scan DebtWire or any other research platform and see what comps' leverage profiles look like. I've interviewed candidates in this position before, and the one thing you are assessing (aside from not fucking up the model) is their ability to sift through what's important and what isn't. How are they thinking about the business and can they accurately identify the key downside levers.
As for FCCR, honestly people calculate it different ways. I don't think you will get penalized here, but the one I see the most is: (EBITDA - capex - mgmt fee - taxes) / (Interest + Mandatory Amort).
I am happy to answer more specific questions on here and/or hop on the phone if you PM me.
Sorry to bump an old thread, but when you say model outputs what exactly would you be showing? I understand in an LBO, you would be showing sensitivity tables around IRR and MOIC. But how would that be different for credit?
Can you please share if this is generally an LBO or DCF? Like in the LBO mostly its IRR and MOIC, but do we also do FCCR/ICR? etc? And if you have any examples that you can share would be a great deal.
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