Lev Fin at BB vs Super regional

How does Lev Fin differ at BBs vs Super regional banks like (Truist, Fifth third, and BMO Harris( I know typically not a super regional but plays in the MM), Citizens, Regions)?

is the work similar just smaller deals?

 
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same way M&A works at BB vs MM, you'll work on smaller, probably hairy deals.

For example... BB underwrites a $2.0bn LBO company with top tier sponsor. the target has stable cash flows, great industry, top competitor etc.. and they put on 7x leverage through an unfunded RCF/TLB/2LTL... maybe some juicy PIK. This deal will probably syndicate to commercial banks for the 1st 2 tranches and direct lenders/CLOs for the 2LTL.

A fifth third will underwrite a deal for a lower middle market sponsor. The target is probably going to be more regional, worse margins, not #1/#2 competitor etc. The debt you'll put onto the company COULD be similar to the above, but you also get into the likes of adding ABLs, amortizing TLA's, no second lien (it's too risky that far down cap table), seller notes, etc. This type of deal is significantly smaller, so instead of 7x leverage, you could be looking at 3-5x. Less commercial bank interest so you're doing club deals with a few other banks who instead of syndicating their debt will underwrite and hold a portion of it.

At the end of the day its all credit analysis, you'll build the same LBOs, outline credit agreements, make some lender presentations, and write up credit analyses for internal approval. It's interesting stuff, and you do a lot less pitching than an M&A banker.

 

Antares isn't a private debt fund. Debt funds make debt investments in companies and hold onto the paper for current yield and/or capital appreciation. They work closer to a investment banking levfin group.

Antares was spun out of GE capital a while back and was acquired by CPPIB ( i think?) to derisk their debt platform with more senior debt (someone fact check me). They try to, very successfully, become this largest underwriter of lower-to-upper middle market sponsor backed transactions. From what I remember, they rarely participate in any deals and are usually lead underwriters. Also they don't hold very much of the paper. They also don't create a public market for any of their debt so their deals are inherently more risky and you are stuck with that company. It's been a while since i've been in LevFin so all of this could be outdated or wrong.

I had a friend there, they pay fairly on the base but they absolutely screw people over on bonuses. If you work there expect to work BB/EB hours. Good exits to LMM/MM PE and debt funds.

 

Candidly you got some right, and the rest I’d characterize is incorrect. I work in private credit so I can share some light. Antares is a private debt firm and they do hold a decent amount of the paper they underwrite, but as the above poster mentioned they do look to syndicate a large amount. If you’re acting as lev fin desk you don’t boast that you have $27B in AUM. I won’t lie Antares is not my favorite firm to work with, they are difficult. My firm invests cross capital structure and we don’t see them do really any junior debt / equity and only occasionally run into them on the senior debt side.

Re: comp you are 100% correct, they hose their professionals on bonus. While my firm invests cross capital structure so inherently we have more of a risk appetite / generate more fees and returns we are substantially smaller than Antares and still pay more than them. It bewilders me how underpaid their professionals are.

 

points to clarify 1) $2B LBO - SunTrust regions etc often are Sub-UWers at a smaller % of economics, same % fee 2) regionals do more right leads all else equal. 3) 7.0x leverage example of RC / 1L TLB / 2L TL, maybe with some PIK. a 7.0x deal implies 5.0-5.25x max through the 1L—commercial banks do not lend/invest at this high leverage. max typically 4.0x with exceptions to maybe 4.25-4.5x for lending (leveraged lending guidance / SNC) but these banks definitely UNDERWRITE 1L TLB and 2L TL, and distribute you institutional investors. 3) PIK much less common vs 2007, more atypical. 4) 2L TL and investors - CLOs are not typical investor. a few reasons. 1st—the 2L investor base and size of the tranche is much smaller. it’s now mainly privately placed by an Owl Rock, Ares, GSO, etc, etc. CLO criteria has limits on many things - rating, deal size/tranche size

 

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