Leveraged Commercial Banking -> Mezzanine/Private credit fund?
Just started 4 months ago as an analyst at a BB doing specialized credit within the commercial bank. In my current capacity I am working on a portfolio of leveraged deals, interacting with PE-backed companies, and underwriting loans for said companies. Most of these loans are uni deals and we are handling the senior portion and bringing on MF debt arms (Carlyle/Ares/TPG/etc.) for the junior components. We also agent the majority of our deals and I have had to deal with default/workout scenarios in the past (including a forced asset sale and restructuring during my time here).
While I am content for now and learning a ton every month, I do eventually want to move on to higher risk profile credit investments (no personal attachment to credit, just where my skills are developing). I'm just curious if my current profile is one that could gain traction in the private debt space if I were to continue down this path, or would I be better off trying to make a move to IB LevFin/DCM/RX first and going from there? Would CFA matter?
You should be able to jump to a senior debt Lev lender place like Antares/Madison/Golub without doing IB. If you want like a true junior debt fund you’d probably need IB. You said your deals are uni but you do the senior and someone else does the junior? That doesn’t make sense, unis are one tranche
Sorry maybe i'm getting terminology confused I'm still relatively new. I meant we are occupying the first out positions of the unitranche loans (often at L+4 - L+5) and bringing on debt arms to occupy last out positions (L+9 or higher) all based on a leverage matrix. The business we are lending to just pays the L+7 blended rate.
You guys are essentially doing FOLO's where you are taking the 1L theoretically and another firm is taking the 2L (in some ways) so it blends to a more attractive price for the Borrower. You'll also have a separate AAL that outlines the subordination agreement. While the analysis is very similar, the level of DD it takes to analyze more junior debt / equity securities is a lot more than senior debt as your debt is behind a significant amount of capital and you have to understand risk / return + equity investing vs pure play senior debt investing.
You may want to look at smaller SBIC funds or mezz funds as you may have more luck there, but most established junior debt players in the middle market (AEA investors, Audax Mezzanine, Falcon Investment Advisors, Maranon Capital, Crescent Mezzanine, etc.) typically hire from IB programs.
Is there a big pay difference between senior debt / junior debt roles?
I can't speak to senior debt vs junior debt within the same institution, but I can say with certainty that the private debt funds are definitely paying their people more (and expecting more). I would hope that the junior people make more as they are almost certainly making more money for their firm.
I work at a firm that invests cross capital structure (senior + junior debt / mezz + equity). We typically look at IB analysts for associate positions within our investment team and would be more amenable to adding credit analysts or corporate banking analysts to our portfolio team that handles post closing affairs + add-ons.
How important is deal experience in the recruitment process? Is experience in some types of transactions more preferable than others? (e.g. loan syndication vs. HY offering vs. sell-side M&A)
Deal experience is important. Showing familiarity with capital structure and financing processes shows capability so I’d highly tout that if you do have that experience
Thanks for making this thread. I'm also working in a commercial bank leveraged lending analyst position and have been wondering where to go from here and what my future options are.
bump
bump as well.
You’ll have a hard time going to a MF credit shop solely because they have an ingrained culture of recruiting from IB. In your shoes I would transfer to a larger bank and find where they do the underwriting (ie within Levfin or the coverage group, just make sure it’s the group that does the model). You should be able to make the transition after that. If you don’t want to go that route, I’d recommend targeting other middle market direct lenders. Always possible to go a larger credit fund but will just be hard is all
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