Recently a lot of senior members of my firm have been emphasizing the value and importance of having a "credit mindset". There are so many sub-strategies to the credit umbrella and each with its own skill set (middle market direct lending, regulatory capital, litigation finance, traditional structured credit, etc etc).
What exactly is the common denominator here? Is it just cash flow analysis? Fully understanding the capital structure and waterfall? Is it the ability to adapt and pick up new loans and their different covenants and indentures? That seems a bit too simple and I feel like I'm missing something here. Curious what the community thinks.
I can't know for sure what your seniors are talking about, but probably looking more at the downside of a deal than the upside. pretty easy to put in high growth assumptions
Is it not equally as easy to input low growth assumptions? (i.e. projecting topline to not grow into the future from current LTM or even stepping it down over time, reducing margins, etc.)
Yes, but if you grow the shit out of something you don't really have any problems. Everything is gravy, you can pay anything and still make money. If you put in low growth assumptions you have to deal with sensitivity to purchase price, refinance, default risk and reserves, etc... you don't have to put as much consideration towards those things if you hockey stick it.
Question everything that bankers do and screw them over so the bank doesnt make any money
I’d say it’s bullshit
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