Hi WSO,
I looked through the multiple posts on private credit but didn’t see much about special situation groups within a private credit firm.
Does anyone have any insights on special situation groups of a private credit firm? What are the responsibilities? Loan workout, portfolio management, restructure underwriting?
Can you also please share any insights on work life and comp?
I greatly appreciate it! Thank you in advance!
Some firms bifurcate their "special situations" team as either an investment team, capital deployment role or asset management, portfolio management / workout role. You should make sure you understand the nuance because they are both different roles. The former will be more traditional front office focused on investing with a special situations mandate and the latter will most likely just be working out distressed or troubled portfolio investments. Some firms will advertise the workout seat as having the ability to deploy capital as well, but in my experience that is mainly limited to putting new money to work as part of a restructuring with the goal of improving the consolidated positions recovery rate. I have found that firms with a true special situations team often don't need an entirely separate workout division, or maybe only have a couple people focused on it, because you are frequently in the weeds of restructuring anyway as part of the normal investment process, so working out an existing position is just another extension of the investment life.
Wow, this was super informative! Would you say the latter, more of the portfolio management be a worse opportunity? Especially if you want to be on the investing side?
If your goal is to be in an investing seat then I would avoid the workout. Again, it is firm dependent, but I find these to be awkward roles with potential for social issues depending on how involved the original underwriting team gets in the process. I am also uncertain how exactly these people get paid as you don't have P&L linkage, and the extent to which value can be added to a workout is not always clear - i.e., should a workout group be penalized for a horribly underwritten deal that is a zero? Workout talent can certainly be recognized, but my point is that I think its harder to quantify. However, I do think that a workout role can be used as a stepping stone to an underwriting seat, so depending on your background it may make sense.
Very few legit special situations teams out there. Best to think of it as a bifurcation between traditional direct lending and prefs
Agreed and good to consider those who tout investing across the cap structure as that often times implies getting into hairier situations but obviously depends on the fund mandate.
do you mind naming some of the good special sits vehicles?
Is it possible to get into opportunistic credit funds say at the Sr Associate level if you're coming in from an Associate role at another MF Credit platform that invests across the cap structure (senior, mezz, pref, etc.) but has a separate team for special sits?
So think an associate from Ares, KKR, Crescent, HPS, etc. (all of which have separate teams for special sits) that wants to lateral into one of 2 firms: a) Bain Cap Credit where you are exposed to both traditional L+600 lending and special sits, AND/OR, b) specific opportunistic funds like BX Tac Ops, Apollo Hybrid, Oaktree Opportunistic Cred, Carlyle Opportunistic Cred, etc.
Thanks!
am joining one of the teams you mentioned. Happy to share the info I've collected regarding the switch (since I would like to make that jump too)
I'll PM - thanks
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