Private Credit/Debt - Valuations

Hi,

does anyone know if private debt funds are concerned about general valuations?

I read somewhere that some credit investments can be linked to equity/enterprise value? Or is there any topic where Credit Investors are concerned or interested in valuation (e.g. multiples)? Do they calculate equity/enterprise values in specific investments?

Thank you!

Best.

 
Most Helpful

From my experience, which is more on the direct lending side as opposed to special sits / credit opportunities, valuation is important but not a lot of valuation work is really done. Typically, diligence is piggy-backing off the package (financial due diligence, commercial due diligence etc.) that the equity sponsor provides and also what their bid is. So you get a sense of the multiple that way, and certainly can take a view based on comps. Ultimately, what is important is the equity cushion. Have to be comfortable that if equity is squeezed, your value is still protected.

 

Hi Sutari93, I'm considering joining a DL/Private Credit analyst program and was hoping that we could chat privately. Could you DM me? My account is new. 

 

Yes, private debt investors are absolutely concerned with a company's valuation but they don't necessarily directly participate in the buyer and seller's negotiations to determine the company's actual valuation during a transaction. Indirectly, how much leverage lenders are willing to put on a business influences valuation. Most critical to private debt investors is getting their money back in full, which takes priority in the proceeds waterfall. However, equity cushion is important and generally speaking direct lenders like to see Loan to Values

 

What do you mean by linked to EV? Would be helpful if you can elaborate. I’m in direct lending and we track valuation internally for reporting/risk management (usually using comps and sometimes third party for our asset management reporting needs). Like others say, lenders care about the equity cushion below in the equity structure.

When you say linked to EV do you mean the loan is in default below a valuation? What valuation do you use as there is no market/liquidity? There won’t be valuation unless there is a transaction/liquidity event.

 

Thank you guys.

I have an offer for a PD shop which invests across the cap. structure (senior, junior, mezzanine and equity) and does LBO financing. I am really interested in modelling and valuation stuff, so I don‘t really know what to expect from this role.

 

Minus reprehenderit eum aut provident. Nostrum nostrum sit itaque. Sint aliquam commodi velit quis cumque laboriosam omnis aut. Ea quas iste excepturi quia. Omnis quam nihil molestiae sed quos magni molestiae. Perferendis nihil similique quia et est. Ducimus occaecati rerum aliquid consequatur et.

Provident animi quia molestiae qui qui. Ut a eaque debitis odit voluptas nisi neque. Aliquam impedit nostrum voluptas est et rerum.

Career Advancement Opportunities

April 2024 Private Equity

  • The Riverside Company 99.5%
  • Blackstone Group 99.0%
  • Warburg Pincus 98.4%
  • KKR (Kohlberg Kravis Roberts) 97.9%
  • Bain Capital 97.4%

Overall Employee Satisfaction

April 2024 Private Equity

  • The Riverside Company 99.5%
  • Blackstone Group 98.9%
  • KKR (Kohlberg Kravis Roberts) 98.4%
  • Ardian 97.9%
  • Bain Capital 97.4%

Professional Growth Opportunities

April 2024 Private Equity

  • The Riverside Company 99.5%
  • Bain Capital 99.0%
  • Blackstone Group 98.4%
  • Warburg Pincus 97.9%
  • Starwood Capital Group 97.4%

Total Avg Compensation

April 2024 Private Equity

  • Principal (9) $653
  • Director/MD (22) $569
  • Vice President (92) $362
  • 3rd+ Year Associate (91) $281
  • 2nd Year Associate (206) $266
  • 1st Year Associate (387) $229
  • 3rd+ Year Analyst (29) $154
  • 2nd Year Analyst (83) $134
  • 1st Year Analyst (246) $122
  • Intern/Summer Associate (32) $82
  • Intern/Summer Analyst (314) $59
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

1
redever's picture
redever
99.2
2
Secyh62's picture
Secyh62
99.0
3
Betsy Massar's picture
Betsy Massar
99.0
4
BankonBanking's picture
BankonBanking
99.0
5
kanon's picture
kanon
98.9
6
CompBanker's picture
CompBanker
98.9
7
dosk17's picture
dosk17
98.9
8
GameTheory's picture
GameTheory
98.9
9
Jamoldo's picture
Jamoldo
98.8
10
bolo up's picture
bolo up
98.8
success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”