Restructuring Banker Tasks
What tasks do restructuring bankers spend most of their time doing at the Analyst/Associate level?
I'm interested in lateral opportunities and want to see what I am getting myself into...
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In my experience, RX deals are more variable than vanilla M&A processes, so workstreams will vary depending on the situation and whether you're working on debtor (more process-heavy) or creditor (more diligence-heavy) side. It's not uncommon for restructurings to contain M&A and capital raise components as well.
But to give you an idea, take standard M&A responsibilities like diligence, operating model creation, valuation, comps, trackers, presentations, etc. and then add in incremental focus on capital structure -- both within the context of a formal restructuring (e.g. recovery waterfalls, debt capacity analyses) and outside / more on the liability management side (e.g. liquidity analyses with various recapitalization options). You'll see a lot of different financial instruments used in the context of recapitalizations (multiple tranches of convertible prefs, rights offerings, warrants, etc.) and will be expected to model the returns / recovery implications for each. For Ch. 11 processes, you may be expected to pull DIP / Rights Offering comps (although most banks have repositories, so it's not terrible). Expectations tend to differ between firms on whether the analysts get involved in doc spreading / interpreting the credit agreements.
Personally, I've gotten exposure to both M&A and restructuring and really enjoy the variability and game theory involved on the RX side.
Additionally, you garner more respect because of the complexities of restructuring. Companies that have to restructure only go to the traditional players because of the reputation and connections while the same can not be said for M&A.
That makes sense, thank you to both of you for the reply. In terms of DD for the creditor side, what exactly does that look like? More or less of the same tasks you listed?
Spent 3 years at Houlihan doing RX work on debtor and creditor. As someone said above, the creditor side work can vary greatly depending on where the fulcrum security is and how level of demand from client(s). The most I ever worked in my life was for a silly amendment for an unsecured creditor committee. Work on the debtor side is a little more hands-on. Overall, the hours are much more variable and intense in RX because you're dealing with a melting ice cube scenario and things often have to happen fast. Also, know that the lawyers drive a lot of the process in RX banking (much more so than in an M&A deal).
A silver lining of RX is that you can pivot well to private equity or private credit. You learn a ton up and down the balance sheet and how those constituents think. A downside is that the discussions are often do or die in RX and everyone is pissed off all the time.
From a junior's perspective, where do the hours come in? I assume that you are building alternative models and plans (on the creditor side) that are directionally-led by senior bankers on the deal?
Not a sexy answer, but at the junior level, I spent a lot of my time doing data clean up/ consolidation, making PPT decks, and making ad hoc models for various scenarios (all from scratch). Given that RX scenarios are much more time sensitive, we would send clients update decks constantly. Like most IB gigs, your experience depends on what kind of deals you are staffed on and the bankers immediately senior to you. You will learn a ton in a chapter 11 deal, but I often felt very distanced from the actual deal because I had a fucking crazy ex-marine associate that would have us working 80-100 hour weeks when 70 would have been sufficient. Therefore I was often so jammed in the weeds and hating life that I didn't learn near as much as I could have while working under a normal person.
All good points above, but do want to add that not all RX deals are super complex / intellectually stimulating
At a high level, depends on the following:
Basically just wanted to say that just like in M&A, there are very complex / exciting deals (prepacks / Ch 11 with a lot of confrontation), and there are also really boring deals (amendments, basically advising ABL / regular bank lenders in general). It's just that the complex deals in RX tend to get REALLY complex - much more so relative to a similar "complex" M&A deal
Hope this helps
How would lenders be able to screw over each other when they are in the same class? Would love some color on this...thanks.
Read up on TriMark, Serta Simmons, and Boardriders.
I will try to explain quickly, it took me a while to understand.
Serta case: creditors who had 50%+1 were able to create a super priority debt above the 1 and 2 term loans, the minority creditors sued but lost because creating super-priority debt did not require 100% of creditors according to credit docs (it is not that simple but judge allowed this transaction). After creating the super-priority debt, the creditors that did the deal with the company did 2 things: gave cash for the next debt in the first out super-priority and exchanged old term loans 1 and 2 at a discount (around 70 and 40c) for the second out super-priority debt. As 10x Leveraged was explaining, this is screwing the minority creditors that did not participate (in this case Apollo and Angelo Gordon) since they used to be first and second in line and now they are third and fourth. Note: they could become fourth and fifth because super-priority has a third tranche that is empty at the moment.
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