Best resources for learning how to do debt modeling?
I am currently in consulting doing largely technology, product, and cost takeout/value creation work with software companies on the buy-side. I am looking to try and make a move to PE at some point in the next couple of years and think the biggest gap I have is understanding the financing piece. Are there any good resources to learn? I am strong with modeling so don't need a basic LBO course.
What exactly is difficult about the debt modeling?
I don’t think it’s complexity in modeling, more to learn about the different types of debt, covenants, strategy of how you negotiate with creditors
that's not modeling of what you are asking, that is structuring which comes from understanding the overall leveraged loan market, private credit markets, etc. you need to read primers, etc. to understand the concepts which then you can apply to modeling, terms and conditions, pricing, etc.
What an unhelpful and condescending comment. Jfc
Probably YouTube or WSP. I think a lot of it comes down to reps as well so you can become super comfortable with understanding covenants, restricted payments (payment baskets), and other items that come with taking on debt. Some instruments have their own nuances that just take time to learn, but these aren’t used as often. (FOLO, converts, PIK, etc.)
A bigger questions is what type of PE shop would be the end goal? Different groups will have different strategies and opinions on using leverage. Besides this, a lot of it comes down to structuring the transaction and understanding what’s market.
For LMM, understanding bank financing, unitranche facilities (non-bank), sub debt, etc. are all important. You can also check out tombstones posted on LinkedIn by private credit shops to see how shops are financing transactions. Stellus Capital Management is a good name to look up.
If you’re looking to tackle bigger deals, need to know fixed income, institutional (term loan b), and other high finance instruments. Textbook bootstrap acquisition. RP’s are huge in large, intricate capital structures with SSNs, SUNs, preferreds, whatever else someone throws in to minimize equity.
No matter where you land, it’s still important to understand LTV and how your comps structure their balance sheet.
Thanks, super helpful. Realistically, will likely land LMM just based on my resume. I think it’s pretty difficult to go into a larger fund from my position. Is WSP worth it? It’s tough to tell online but it seems like it has everything someone in my position would need + case studies, tests, etc
I had full access to the site as a part of my IB analyst program. Super helpful but couldn’t tell you the cost or the ‘package’ we had.
How’s he going to learn how to model watching the World Series of Poker?? 😂
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