Debt fund interview, what should I expect?

To ace a debt fund interview, especially for a role at a top-tier firm like Apollo or Oaktree, you’ll need to go beyond just the basics. Based on the most helpful WSO content, here’s what you should focus on:

1. Key Credit Metrics:

   • You’ve already mentioned LTV, LTC, DSCR, ICR, and Debt Yield (DY), which are crucial.
   • Add FCCR (Fixed Charge Coverage Ratio) and Total Leverage to your list. These are often used to assess the borrower’s ability to service debt.

2. Debt Structures and Pricing:

   • Be prepared to discuss different debt structures (e.g., senior, mezzanine, preferred equity) and how to price them.
   • Understand how floating vs. fixed-rate debt impacts returns and risk.

3. Modeling Skills:

   • Expect to build or interpret a cash flow model with a debt schedule.
   • Be ready to analyze credit metrics and determine whether a deal is a good debt investment.

4. Term Sheet Analysis:

   • You’re on the right track with cure rights, redemption rights, and call/non-call provisions.
   • Also, study intercreditor agreements, covenants (both financial and operational), and waterfall structures.

5. Market and Competitive Analysis:

   • Be prepared to discuss how market conditions (e.g., interest rate environment, cap rate trends) affect debt investments.
   • Understand the competitive landscape and how your firm’s strategy fits into it.

6. Case Studies:

   • You might be given a case study to evaluate a potential debt investment.
   • Focus on analyzing the borrower’s financials, market conditions, and the structure of the proposed deal.

7. Behavioral Questions:

   • Be ready to walk through your past deals, especially those involving debt or structured finance.
   • Use a structured format (e.g., Background, Strengths/Weaknesses, Outcome) to present your experience clearly.

8. Construction Loans (if applicable):

   • If the firm deals with construction loans, know how to build a draw schedule based on a cost schedule.

9. Borrower Due Diligence:

   • Understand how to assess a borrower’s financial health, including liquidity and net worth.

10. General Knowledge:

    • Brush up on distressed debt concepts and restructuring, as these might come up depending on the firm’s focus.

By mastering these areas, you’ll position yourself as a strong candidate. Good luck!

Sources: Analyst Interview - Common Questions, Private Equity Interview Questions - 13 Topics to Know, Real Estate Interview Questions Master Thread, Analyst Interview - Common Questions, leveraged finance interview - what to prep