Distressed Fund Interviews? (i.e., Oaktree)

OreosI know an MD at Oaktree and he said they interview 50+ people per position (didn't opine on how many applications they get), like ex law guys, highly rate Houlihan (restructuring) and GS (IBD). So basically impossible positions to get.

As for OP, I assume he already has an interview or he wouldn't be asking the question.

chibd2012My background is two years BB investment banking in the Industrials Group and two years at a buyout firm, working mostly on LBOs.

If it's distressed investing the question is are you investing on the basis of cash flows (EBITDA) or against assets? In either case you will need to understand valuations both at the enterprise and asset level. Distressed valuations of companies is not the same as going concern companies for obvious reasons, so you would need to have a strong understanding of what you're valuing in from the perspective of distress. Similar for asset valuations, you will need to know market haircuts to make that you're loaning against the collateral. I'm also assuming you will work heavily on the negotiation of the loan documents, ICAs, gaurantees/indemnifications, etc as part of your associate gig so you should have a good understanding of the mechanisms of credit agreements and the familiarity with term sheets of distressed lenders.

If they have third party assets, they should have SEC filings here: http://www.adviserinfo.sec.gov/IAPD/Content/Search/iapd_Search.aspx

The part 2 brochure may have details about their investment process and risk practices

thanks - that helps. I think the big thing helping me is the fact that I'm well versed with respect to credit facilities/haircutting collateral from current role (just a clear drop in quality of collateral). It definitely seems like a departure, in a positive sense, from the way things are done at a BB.

Can anyone comment as to the typical valuation methods used by distressed lenders for physical collateral (think power plants, aircraft, etc).

US or Europe?

Europe, but I would assume that it doesn't make that much of a difference?

The search function works well; this has been asked 1000 times and gets asked every week

bump.

Thanks for the bump, nuts, and thanks to all who have PMed me.

So the recruiter told me that I will likely be faced with several distressed loan problems. Can anyone think of examples of distressed loan problems that I might see in an interview?

Thanks again.

BR

just pm you

Also very interested. Really would like to see an example of the balance sheet adjustments when a company is bought below net asset value (aka no goodwill created). Does anyone have an example model with that type of purchase structure?

have not come across a model, but theoretically just like you mark assets up, you'd mark them down (closing/opening balance sheet), preferably long-term assets. remaining neg goodwill is recognized as extraordinary gain in year. I believe under international standards you'd have neg goodwill in your financials

Thanks guys - distressedd I just msg'd you back with contact info

The way it was explained to me is that a restructuring w/ impairment is just the reverse of an LBO - you delever instead of lever. As for the specific treatments of goodwill etc., that's where things get a bit fuzzy. My inclination would be to mark down the PP&E/land to fair market value (i.e. what's the implied value of said assets after taking into account the new enterprise value/debt/equity etc.). But I'm just guessing here.

Interested in learning more

interested as well

We're working on it - pm me your email addresses

Was this ever followed through? Would still be keen to know more.

This book has all you need - "Valuation for Mergers, Buyouts and Restructurings" Good reference to have.

Can you please send me everything you used to prep? Have an interview tomorrow too, same situation

Would really appreciate it!

Read "Distressed Debt Analysis" by Stephen Moyer - possibly the best distressed investing / restructuring advisory guide out there.

Agreed with the above. Great book.

be similar to most distressed/value fund interviews. If its on the spot with no time to prepare, they will likley make you break down a company, possibly a stressed/distressed company. Obviously being able to understand the typical credit metrics (priority of claims, leverage differentials between securities in cap structures, asset coverage), valuation techniques (how do you value company, FCF yields, EV/EBITDA, etc) and breakdown of business and whats causing its stress will be the most important. Detailing whats driving cash flow (or lack thereof) and if it's possible to fix (is it operational problems or balance sheet-overleverage problems) will be important and understanding downside risks to any kind of investment (whether long or short recommendation). Also, if company not in bancruptcy, might have to highlight what likely outcomes from a filing are. Are you sure its going to be a distressed interview, they do all of their public side HF investing through their two funds which are labeled distress (they take a lot of large activist positions), but they obviously do a lot of distress also (just saying case study might not focus on a distress company).

I haven't read Whitman's book, but Moyer's has been highly rated by most who have read it.

Wish I could add more

moyers is the best out there

also read thru some of the case studies here to get a better understanding of the distressed process

http://www.distressed-debt-investing.com/

Thanks a lot, "restructure-this" and "iambateman". It's my luck to have your guys help me out.

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Did you have the interview? How did it go? I just came across another book. Not as good as Moyer's but similar content. Try Bankruptcy Investing by Branch and Ray.

Good call iambatemam. First time I've seen that website - the guy seems legit.