Hi guys,
Are there any good practical resources on debt financing? (ability to pay, sizing, risk metrics etc). Not much available on Amazon (unless one is interested in a subset that is project finance).
How do you bargain down lenders on interest margin?
Thanks much!
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I’ve spent a few years trying to find a resource like you’re asking about. Not quite sure it exists in the form you are looking for.
Truth is I think the art of credit analysis / underwriting hasn’t really been codified, outside of formal credit training programs that commercial / investment banks used to sponsor in the 80s and 90s. I don’t think even those they exist anymore. I think it’s probably difficult to learn about this specifically outside of working on a levfin or dcm desk at an investment bank or within corporate banking groups.
The only book I’ve found that comes close is called “a pragmatists guide to leveraged finance” by bob kricheff. It’s not cheap and not sure it’s worth the money because it’s much more qualitative than quantitative. Plus it’s pretty short so it barely scratches the surface of the underwriting process.
With respect to your specific question about negotiating interest rates, I think there are a lot of inputs that go into that. Aside from just the structure of the paper, there is also the market factor. Even if you negotiate the coupon lower, if comps suggest that the interest should be higher or lower, the paper would be issued at OID/OIP irrespective of what’s negotiated based on the environment.