Private Credit Interview Advice

I'm a first year analyst in an M&A focused coverage group and I have an interview with a MF for their Private Credit group next Friday. I feel pretty comfortable in terms of what is necessary to know for a PE interview, but what should I expect for a private credit interview? Would it be the same accounting technicals, deal discussion (but with a focus on the credit thesis) and modeling an LBO (but looking at credit stats vs IRR/MOIC)?

Any advice on things to brush up on or drill down on? Thanks!

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Comments (26)

Most Helpful
Sep 21, 2019 - 1:14am

(1) Most of the deals on your resume should have been financed with some sort of debt - know the trading levels, covenants, leverage, pricing, ratings, and credit strengths/weaknesses - be able to walk through why lenders or debt investors got comfortable with the deal

(2) Know something about the current state of the general debt market - your bank should publish a LevFin weekly or something on relative value, just generally browse through it and see if anything catches your eye. Check where the BAML ICE index is

(3) Private credit isn't like PE in the sense you aren't buying a business - you're just investing in a piece of the capital structure. Case study will probably be similar to an LBO model, but centered around leverage, fixed-charge coverage and debt service coverage. Always think about the downside and placement in the structure (Senior, unitranche, Mezz, etc.), credit is about stable returns and not the upside you see in equity deals

In my experience, credit roles are easier interviews than equity - not as technical, more focused on the fundamentals

Sep 21, 2019 - 12:06pm

Very comprehensive list by the poster above. Only other thing to add that might be useful is when revisiting your deals, try to recall if the lenders negotiated hard for certain rights / covenants as they learned more about the underlying business - understand why they required these terms to participate in the deal as these are essentially things you'll need to think through on the credit job.

  • Associate 2 in CorpDev
Sep 30, 2019 - 1:01pm

Hi OP how did it go? Can you share about the questions you got?

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Sep 30, 2019 - 6:52pm

Haven't heard back if I got it yet, but given how early it is the questions were honestly not too hard. Lots of talking about my deal experience: where would you invest in the capital structure in this business, what are some risks of this business, how much leverage would you put on this business, what would you price the debt at, what analysis would you do to get comfortable with the risks of this business

More general questions about how you'd think about businesses in general with a focus on the downside (so same questions as above)

Lots of time spent on why credit vs equity (they don't want kids who just want to go to the credit side because they think it'll be easier, but have no interest in credit)

Model test was just a CIM and a couple hours to build a model and investment memo then defend / explain the assumptions to a couple VPs & principals

Sep 30, 2019 - 11:15pm

OP, do you by any chance know which recruiters have the most private credit clients / which recruiter reached out to you for the opportunity?

Array
Oct 1, 2019 - 8:52am

Perfect, appreciate the color on that. Sounds like the interview went well for you! Good luck the rest of the way

Array
Oct 1, 2019 - 2:55pm

It varies, but the larger MM guys pay a little over $200k all in for first year associates, so I would think a MF is slightly more than that, although I can't imagine it would be that much more.

Source: my buddy who is an associate at a large MMcredit fund.

  • Prospect in IB-M&A
Oct 5, 2019 - 9:14pm

Any advice on top credit funds that are currently recruiting? Also curious if you heard back from your interview yet?

Oct 18, 2019 - 10:55am

Thank you all for this ! Very insightful.
Do you have examples of difficult questions / technical questions I can get during a Private Credit interview?

Array
Oct 18, 2019 - 11:12am

It was early so I didn't get any really tricky technical questions - but I suppose if they pressed hard on your answers about where's to invest in the Capital structure and where to price securities that could get tough

In general if I had to guess where I could get tricky I'd expect tough accounting questions, more complex instruments (than just TLA/B) like step up bonds, PIK debt and preferred equity. Also, probably not super common, but I could see some questions digging in a big about bankruptcy being possible (if it's a distressed shop or shop that's known to do distressed I'd 100% make sure I could speak on the bankruptcy process)

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