Anyone here working at Leveraged Finance/ Acquisition Finance at a BB in London?
I am really curious about how your day-to-day tasks and responsibilities look like.
Several questions I have (I have many more, but can add them later or ask via pm if possible):
- Do you hold a personal portfolio of companies, and if so, how many tend that to be?
- How lean are your deal teams, just you as an analyst and an investment manager/deal captain?
- On a new deal or for an event of an existing client, what responsibilities are you given? For example, do you run Ratings and RAROCs for fee/margin pricing sensitivity? What part (or in full) of the engagement letter do you write? Consequently, how much work do you perform on the credit application?
- If you have a portfolio of your own existing clients (together with a more senior person), what tasks do you have for those? Do you write the (semi)-annual reviews or do you, are there recurring KYC reviews that you have to help on?
- How many times do you actually work on a pitch (in ppt)? In LevFin usually you don't have to pitch all that often, how is that for you?
- Do you actively look at the secondary market (do you have bloomberg access for instance), to look for opportunities to enter or to exit an existing client?
Thanks in advance!
PM me :)
PM'd!
I'm in a similar position to OP and would like insights if possible. Can I also DM?
Sure
Currently at a mid-tier BB in LevFin in London so think I could shed some light on your q's.
- Do you hold a personal portfolio of companies, and if so, how many tend that to be?
Honestly wouldn't call it a personal portfolio especially at a junior level. The way it works is usually once you've been assigned on a pitch / deal for a specific Co, you will keep doing the work on this name on future projects. And over time, you will indeed have your "personal portfolio" of 5-10 companies.
- How lean are your deal teams, just you as an analyst and an investment manager/deal captain?
Very much dependent on the size of the deal and whether it's a new or existing client. Usually you have product team (LevFin) and industry + sometimes regional / relationship coverage. On the LF and Ind side, you normally would have ANL + ASO + VP + MD. Usually ANL & ASO do all the work under VP's supervision, while MD does high level / terms negotiations stuff + ofc reviews the deck for comments etc.
On a new deal or for an event of an existing client, what responsibilities are you given? For example, do you run Ratings and RAROCs for fee/margin pricing sensitivity? What part (or in full) of the engagement letter do you write? Consequently, how much work do you perform on the credit application?
Well again depends what a situation is. But let's say it's a first time HY issuer trying to access the market. You first start with the review of BP, existing credit docs, covenants etc. to establish whether they have incremental debt capacity. Then you might have to put together an LBO model to show the paydown. You then schedule a call with LF Cap Markets desk to gauge their thoughts on pricing for the new instrument. After that you put together a deck to go back to the client with your proposal. If it's a green light, you start working on the internal credit approval memo and ratings process. You then start putting together CIM and marketing materials etc... It's a quite long process so feel free to ask any follow ups about the parts that interest you.
On your question on engagement letter, you typically don't draft any docs, lawyers do it and seniors may give comments here and there.
If you have a portfolio of your own existing clients (together with a more senior person), what tasks do you have for those? Do you write the (semi)-annual reviews or do you, are there recurring KYC reviews that you have to help on?
Most often you dial-in to their quarterly results calls / lender updates and take notes, then you send it around to the wider working team to see if there are any potential pitch opportunities. You also regularly update capitalisation tables to reflect the latest financials and trading levels - again, to see whether you can pitch something there. AFAIK, you don't write any reviews. KYC is also fully handled by a separate team. KYC itself is probably the most frustrating / laborious aspect of the work, but this is probably very much bank dependent.
- How many times do you actually work on a pitch (in ppt)? In LevFin usually you don't have to pitch all that often, how is that for you?
This is very much bank dependent, but I am pretty sure PPT is like 60-70% of the actual work. I work in the group which handles the model, but nevertheless, ppt is an still the main instrument. In LF, a lot of slides that you prepare are around market updates, execution considerations, timelines etc.
- Do you actively look at the secondary market (do you have bloomberg access for instance), to look for opportunities to enter or to exit an existing client?
Yes, this is an essential part of the LF job. Everyone has access to BBG and you constantly look at secondary trading levels. You will be regularly asked to update cap tables and trading comps to see where the peers are trading.
Hope this helps:)
@modjo Thank you very much for the elaborate answer, I appreciate it a lot!
I have several questions (for now), that I hope you are also willing to answer:
Overall, from you comments, it seems that a large part of your work is pitching (60-70% ppt). Can you elaborate more on this as in: I would assume that private equity firms at some point prefer to use banks to underwrite their deals that they have a close relationship with. With this given, why would you constantly need to pitch? Also, pitching would (I assume) be for underwrites ("mandated lead arranger role"), but what about deals in which your bank is asked to join the financing. Does that happen often? Because then there is no need to make a fancy presentation, you can instantly just fill out your financing grid.
Could you elaborate more on your work on internal processes, so not so much external (pitches) focused. Do you write an engagement request (goes to risk) and do you write the credit application? If so, what are your responsibilities in writing these? Also, what other internal processess are you required to do? (do you have to work a lot in rating or LGD/EAD calculation systems?).
Do you also have to write (semi)-annual reviews on existing clients? If you were part of the original transaction, I would assume you as an analyst have to write an annual review with an update on how the credit is performing etc (the review goes to risk and needs to be approved).
In regards to BBG, what are you exactly looking for? You receive monthly/quarterly financials, can get more info via the agent, and lenders meetings etc, so you should definitely know whether a credit is performing well or not. There shouldn't be any suprises therefore in the secondary market (perhaps you can check once a week what prices are doing). Are you actively also looking for opportunities? If so, if you see a credit trading quite 'cheap', how do you make the decision (you have limited info, private company of course) to buy yourself into a credit.
I have more questions but for now i'll keep it to these four points.
I once again want to iterate, I really value your insights, they are very informational and useful to me!!
Thanks in advance.
The split between pitching and execution varies on multiple factors: your firm's standing in the LF space, market environment etc.
PE firms do indeed prefer coming back to banks that were on original LBO, but you will still constantly pitch new ideas to those portfolio companies to maintain dialogue etc. Not sure again where you this from "Because then there is no need to make a fancy presentation, you can instantly just fill out your financing grid". Obviously grid doesn't require a presentation, but you will still need to do 30-50 pages internal credit approval memo, c.20 slides for ratings, c.20-30 slides for LP etc. This is obviously purely illustrative just to show you the amt of work you'd do in ppt on live deal
2.Well this again depends on what process you are working on. But on most processes you would need to put together an internal credit approval memo which covers historical performance, credit highlights, S&Us and PF Cap + different cases w/ assumptions & paydown pages, then a bunch of regulatory stuff, multiple pages on collateral & other downside protection
At my shop you don't write engagement requests (not sure even what it is) but work together with Wholesale Credit and Risk on the internal credit approval memo to come up with structuring & stress cases and figure out institutional appetite when it comes to lending etc.
There's a bunch of internal admin stuff that you are required to go through but the most important one is getting an approval from your internal credit committee who reviews the memo you put together. There's also obviously KYC, which you don't do yourself but coordinate; maintaining the deal site etc.
Usually it's the industry coverage team who does ratings, but this is also very much shop dependent.
3.No, you don't do this in LF - seems more like a corp banking thing. There's simply no need for this bc once the transaction is syndicated (assuming an underwrite), the bank doesn't have any balance sheet exposure to the credit.
4.This is kinda unrelated to how credit is performing to be honest. In LF, on BBG you look for current & historical trading levels for bonds / loans (some shops use Markit). This become particularly important when you are trying to pitch a new idea and need to come up with pricing. As a very rough example - If existing bonds are trading @ 97, you are very unlikely to issue at par and might have to add some New Issue Concession to boost demand for new issue. You also regularly update trading levels for comps. Secondary markets for bonds are very liquid and can change tone 3 times a day in the current environment.
On your opportunities question. You seem to be confusing IBD LF with Credit Funds. LF doesn't look for investment opportunities and doesn't buy into the credit. LF IBD executes leveraged bond / loan transactions for corporates and PE PortCo's.
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