Private Credit / PE IC Memo Tips & Examples (PPT)

I'm not at a private credit shop, but I talk with direct lenders/private credit managers on a regular basis. You're right they focus a lot on risk-mitigating factors. Things that are important in the private credit space is the understanding of covenants, terms and documentation as well as justifying those things in relation to the risk the credit manager is taking. (What is the revenue stream diversification and how many business lines does the borrower have? Does the credit agreement have a maximum leverage covenant or a minimum liquidity covenant?) On the whole, to make a compelling investment thesis (to the IC and the LPs), you have to justify why you think the transaction's specific structure mitigates as much downside risk as possible. Knowing how these managers think, you'll get questions about the issues facing that sector and the broader economy. (Think about how the business will function once they are no longer able to pass costs on to their customers, i.e. dealing with higher materials costs and inflation. At the same time, their cost of debt may continue to increase. Rising rates are friendly to credit managers' income statements but not necessarily the borrower's borrowing costs.) The TL;DR version is this: there are lots of different buttons a lender can push to make sure they have solid downside protection and still get good economics/relative risk in return.