Credit Risk to Private Credit
Hi guys- wanted to reach out to general crowd to get more insights and views.
I have been working for 3 years for BB in the credit risk/ lev fin department. I often get opportunities from recruiters for role on the buy side. However I feel I lack the more technical background the make the move. Will soon start interviewing and I think I ll get grilled on the technical/ modeling parts. Any advices or thoughts ?
Hey there! It sounds like you're gearing up for a big move - exciting times! Now, let's get you prepared.
Firstly, it's great that you're aware of your areas for improvement. That's the first step to acing those interviews. When it comes to technical and modeling parts, the WSO Elite Modeling Package could be a game changer for you. It's designed to help you master financial modeling and it's one of the most popular programs on WSO Academy.
Also, remember that credit roles are often more focused on the fundamentals rather than being overly technical. You'll likely be asked about your deal experience, where you would invest in the capital structure in a business, and the risks involved.
In a Private Credit Interview, you might be asked to build a model and investment memo in a couple of hours and then defend/explain the assumptions to a couple of VPs & principals. The case study will probably be similar to an LBO model, but centered around leverage, fixed-charge coverage and debt service coverage.
Remember, credit is about stable returns and not the upside you see in equity deals. So, always think about the downside and placement in the structure (Senior, unitranche, Mezz, etc.).
Lastly, don't forget to brush up on your knowledge about the downside protection thesis. It's a key aspect of credit roles.
Hope this helps! Good luck with your interviews. You've got this!
Sources: Private Credit Interview Advice, IB Credit Risk to Buyside Debt
1. Do not interview with your most coveted opportunity first. Make your mistakes in an interview that you won't be upset about if you don't get the offer.
2. I'm going to assume you're in Credit Risk and work with LevFin on particular transactions. Understand you're interviewing against people from IB/levfin, who frankly, are generally more "polished" in terms of desired junior skillset. Figure out what sets you apart from them and sell your interviewer on what you can bring to their company. Desired junior skillset is modelling accuracy, overall work product polish, and critical thought that goes to the second-order effect (while showing deference to the wisdom of those more senior to you).
3. You need to understand how to structure a buyside model. Dig in deeply into 3 buyside corporate LBO models your group has done recently. Pay attention to how they're structured. Many good models will have the same key elements. Understand CONCEPTUALLY how they flow "upwards" until you arrive at that glorious summary sheet. Read the summary terms and conditions sheet alongside those models to see how any unique elements were incorporated.
4. Understand the various different loan products and structures and in what situation they'd be suited for. E.g. what sort of loan would you provide to an asset-lite early-stage tech company? What would you provide to an established manufacturing business in a cyclical industry? What would you provide to an energy transition services company that just lost a major contract and needs liquidity? You have to first understand the business and industry before you can understand the most appropriate offering.
5. Know the key terms to focus on in credit agreements like the back of your hand. Get comfortable reviewing legal documentation. Have an idea of how you would size baskets (always understand that baskets can and will be used against you).
6. Speak about a deal you covered that lost money. Speak about how it could have been structured better in hindsight and what you've learned from that experience. Speak about the RX experience and what you learned (this is highly valued).
7. Lastly - fully understand the pros/cons of jumping from BB to private credit. Offer to buy lunch for people from your group that have placed in private credit so you can hear their experience. Grass is always greener my friend.
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