How different is LevFin and DCM/ECM Capital Market?

Noob question guys and gal. What is the difference between LevFin and DCM/ECM in Capital Market? What about in terms of day-to-day responsibilities? I'm exploring opportunities in ECM/DCM, and I'm wondering whether it has good exit opportunties. Thank a lot in advance all.

Leveraged Finance vs DCM

Leveraged finance is primarily deals with high yield debt. The actual work they do can very from firm to firm. Juniors do more modeling, memos, materials and some client work. The group is can be responsible for LBO's, dividend recaps, levaraged loans, and high yield bond deals.

Debt capital market teams provide advice on raising debt for acquisitions, refinancing of existing debt or restructuring existing debt. They work more closely with trading desks and deal in investment grade debt.

from certified user @metalalpha"

LevFin = High Yield
DCM = Investment Grade

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Comments (18)

Oct 10, 2010 - 12:20pm

Honestly, search function. I've seen this answered so many times in the past couple of weeks it's not funny.

Regardless, LevFin is less plain vanilla than ECM/DCM and far more integrated into things like the LBO process. What LevFin group is good depends on whether analysts do modeling or whether they do pricing. Some LevFin groups are heavy on Sponsor exposure (LBOs and Dividend Recaps) while others are more focused on corporates (refinancings and new issuances). You can guess which have better exit opps.

Please don't bother asking follow-up questions now. Search function.

Oct 10, 2010 - 2:40pm

Difference, investment and non-investment grade. day-to-day responsibilities vary with each bank, but lev fin usually have good exit opps into hf's n pe, if you are exposed to good amount of deal flow

Mar 16, 2013 - 2:42am

LevFin vs DCM (Originally Posted: 11/08/2009)

Is there a difference, or is one part of the other? I've heard LevFin is part of DCM, but also that LevFin has great exits to PE while capital markets doesn't so I'm slightly confused. Any thoughts would be really helpful. Thanks!

Mar 16, 2013 - 2:43am

Lev fin focuses on high yield and you get the type of credit analysis which PE firms prefer + good LevFin guys can move to credit hedge funds

DCM (typically though varies from bank to bank) focuses on investment grade and, in my expeirence, credit analysis is somewhat lighter.

Mar 16, 2013 - 2:44am

DCM doesnt involve any thought, LevFin does. Simple. Given the risks involved with high yield bonds and leveraged loans, the amount of analysis that goes into any LevFin transaction is infinitely more in-depth than in DCM.

Mar 16, 2013 - 2:45am

so to clarify - DCM and LevFin both focus on debt financing

also - so an LBO would need help from both the M&A group and the LevFin group? and PE firms like M&A guys since PE firms buy companies and LevFin guys since PE firms need to arrange high yield debt to finance LBOs?

Mar 16, 2013 - 2:49am

DCM is very process driven -- e.g. Microsoft (AA or A rated) needs to issue some bonds. Institutional investors (e.g. PIMCO's, Fidelity's) line up to buy it, not really that much "risk" or unknowns.

LevFin is a different animal. High yield bonds are issued by non-investment grade companies (i.e. significant credit risk). As such much more due-diligence is required. This is compounded when it comes to Leveraged Buyouts (run by LevFin and Financial Sponsors) when private equity funds needs to borrow large sums (bank loans, hy bonds, mezz funds) to finance the transaction. In this case, each creditor assumes a significant amount of risk -- therefore, significantly more due-diligence, strategic considerations, and financial modelling is required.

Mar 16, 2013 - 2:50am

Ah yes, another DCM Lev Fin thread.

looking for that pick-me-up to power through an all-nighter?
Mar 16, 2013 - 2:51am

lev fin is leveraged loans (although kinda dead right now), high yield bonds, and mezz debt.

dcm... is well... investment grade, plain vanilla stuff. some banks put levfin in the dcm bucket.

Mar 16, 2013 - 2:55am
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