How can I prepare for a debt capital markets analyst role?
Title says it all. I’ll be starting in a few months as an analyst. I don’t have a finance degree. I have some real estate internship experience in capital markets but I still don’t feel prepared. Does anyone have any advice on how to prepare for a role in debt capital markets? Thanks in advance.
You're coming in as an analyst, most people will expect you to be worthless for 3-6 months until you get your feet under you. I don't think there's a ton you can do other than hone your excel skills and make sure you know how to model debt, since that's all they'll likely be asking you to do. Beyond that I listed a few points that I focus on as a client:
1. Good capital markets professionals are good at identifying what's important to me as a client, and then finding lenders that can offer what I want (or if you're a lender, being up front about what you can offer so you're not wasting my time). do I care about a lock out period? minimum interest? am I focused on proceeds? Rate? Etc.
2. Devil is in the details - I want someone that can quickly and accurately let me know the total financial cost of my loan options and how they relate. A lot of times there are costs that matter beyond rate (entrance/exit fees, minimum interest, etc.). Or, if I'm looking at different leverage levels I may want to know what the marginal cost of the additional capital is? If I have an $80mm loan at 5% or a 90mm loan at 5.5% what's my marginal cost of capital (inclusive of fees and other costs)? Where is the breakeven hold between two different options? etc.
3. Non-financial terms/risk - Is there any execution risk for each lender? You can't really control this as a lender unless the Head of Credit is your dad or something, but if you're a broker, I want to know if the guys that want to lend me money have done projects like this before, have decision makers toured the project, etc. From an operations perspective, how predatory can these guys be? Are they going to foot fault me into default? Are the comfortable with the guarantees I can provide? do they put overly onerous conditions in the loan docs.
Like I said above, you really probably just need to know how to calculate basic metrics (DSCR, YOC, Total Loan Cost including amortized fees, DY, etc.) and be good in excel. If you can do the models accurately, and then step back and show you understand the rest that will set you apart as an analyst.
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