Debtor vs Creditor Restructuring: What Is Better?

Hi guys,

I will be working as an SA in Rx at PJT/LAZ/HL.

I have read bitter battles about Debtor vs Creditor but am hoping to have one thread that clearly articulates the strengths, weaknesses, and potential winner for the two different assignments.

Secondly, just because I am curious, do these three groups give summers exposure to valuation analyses beyond Comps/Transactions/DCF (ie LBO or Merger Model). I ask because If the Rx space does not seem to be my thing, will recruiting for FT be hard because I don't get to see as many LBO or M&A models?

Thanks guys!

 
Best Response

First - don't think you should worry about debtor vs. creditor side mandates as a summer analyst. There are differences to each deal but this won't materially impact your summer analyst experience.

Outline of differences (not necessarily exhaustive):

Debtor side - Controls process, typically leads negotiations with various creditor groups - Lots of process - management presentations, court exhibits, rating agency presentations, etc. - Prepares formal valuation - Diligence of company provided information - Generally larger fee (you won't see any of this as an SA)

Creditor side - Less process, more reacting to information provided by debtors - Diligence of materials provided by debtor advisors - Tends to involve less work in general - Analysis tends to be more high level because relies on less data (often public information only)

There's no better deal... just different. HL has historically done more creditor side work but given how few financial advisors have RX groups, all advisors do both debtor and creditor side. If Lazard/PJT doesn't get hired on the debtor side, they'll try to win one of the creditor sides.

I think you may have slightly inflated expectations for your summer analyst stint. All three of those firms are great and I'm sure you'll find your internship rewarding, however, you probably shouldn't expect to be working on a valuation, or building models at all. Not to say this won't happen (if you're good and a little lucky) but here's why it's unlikely: - The expectation is that you know nothing; you will be assigned the most painful tasks that analysts don't want to work on - You may not get staffed on a live deal; 8 weeks is a short time (although RX is pretty busy right now so this may not apply this summer) - Analysts / associates don't want to spend a ton of time reviewing your models / valuation work (see #1)

That said - the standard RX model is a reverse LBO (deleveraging). Unlikely you'll work on a merger model.

Recruiting for an M&A group from RX will not be any harder than regular FT shopping (i.e., difficult but not impossible). Also - all three of those firms have M&A groups - if you do well during your internship but really don't like working in credit, I wouldn't be surprised if you could move within the firm.

Source: I work in an RX group

 

Hi Guest Excel Monkey,

Thank you for responding to my post. I appreciate all of the information you provided. It was very clear and directly answered my questions. Thank you for taking the time to write a thorough response for a niche question.

Best,

 

Good point, Ill try to make it as general as possible. Mainly just curious about a few things, 1. What kind of skill set do you think are important for pursuing lateral positions? 2. Would you say your work is more technical than a regular coverage group at a bank and what kind of positions do people in RX go on to pursue? Is it mainly distressed debt investment funds?

 

Re: 1 - I haven't lateraled before so take what I say with a grain of salt. My guess would be same skill set as any banking interview... can you do the math and put up with the lifestyle + are you a good cultural fit. Would also assume network is even more important to getting interviews.

Re: 2 - I would say that rx work is on average more technical than most other banking groups (based on conversations with friends in other groups + banks).

Re: 3 - Not only distressed funds. It's obviously the easiest story to tell so you'll have an advantage when applying to those roles on the buyside. That said, rx analysts end up everywhere (MF PE, LS equity, distressed; with interviews at top MM PE, macro HF, event driven HF, etc.).

 

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