PC Case Study

For a 1-hour take-home case study with a private credit (PC) firm, here's what you should focus on based on the most helpful WSO content:

1. LBO Modeling Preparation

• Key Focus: Since you're expected to perform an LBO, remember that the goal in private credit is to assess the debt capacity of the business rather than equity returns.
• Steps to Prepare:
  1. Comparable Companies: Identify 5-10 public comparable companies. Spread their capital structures (e.g., revolver usage, term loans, bonds) and calculate leverage ratios based on Adjusted EBITDA.
  2. Leverage Assumptions: Use the leverage ratios from your comparables to make reasonable assumptions about the target company's debt capacity.
  3. Interest Rates: Be prepared to justify the interest rate you'd charge based on market conditions and the company's risk profile.
  4. Simplify the Model: Focus on EBITDA, CAPEX, changes in working capital, taxes, and a debt module. Skip equity returns and prioritize illustrating debt capacity.

2. Debrief Preparation

• Company Analysis: Be ready to discuss the company’s overall financial health, industry positioning, and risks. Prepare a slide or two summarizing:
  • Investment Thesis: Why the company is a good candidate for private credit.
  • Risks and Mitigants: Highlight key risks (e.g., market conditions, operational challenges) and how they can be mitigated.

3. Time Management

• Practice completing a simplified LBO model within 1 hour. If you can’t finish the full balance sheet, focus on the critical elements like EBITDA, leverage, and debt repayment capacity.

4. Resources to Review

• Rosenbaum & Pearl: Chapters 4 and 5 are excellent primers on leveraged finance and LBO modeling.
• S&P Leveraged Loan Primer: A great resource to understand the loan market dynamics.
• WSO LBO Modeling Course: If you have access, this can help you refine your skills.

5. Mock Practice

• Do a few practice runs of paper LBOs and 1-hour LBOs. Start with no time constraints, then gradually add a timer to simulate the real scenario.

By focusing on these areas, you'll be well-prepared to tackle the case study and impress during the debrief. Good luck!

Sources: Private Credit Resources and Prep, Q&A - 1st Year PE Associate at a US MF in Europe (KKR, BX, TCG, WP, TPG, BC, APO), Got this task during an Private Equity internship interview, how to handle it?, Private Equity Interview Questions - 13 Topics to Know, leveraged finance interview - what to prep