The leveraged finance (LevFin) group's primary responsibility lies in underwriting credit facilities for companies seeking debt capital; however, it differs from DCM in that LevFin typically deals with companies rated below investment grade (Ba1/BB+ or lower), which translates to higher-risk entities that come with elevated interest rates on their debt offerings.

Types of Transactions

• Leveraged Buyouts (LBOs): In LBOs, private equity firms acquire companies by financing a substantial portion of the purchase price through debt. LevFin bankers play a pivotal role in securing these loans, often backed by the assets of the acquired company.
• Acquisition Financing: When corporations decide to acquire other companies, LevFin bankers are responsible for finding the financing required to complete the transaction. These deals are inherently riskier due to the nature of the investment.
• Leveraged Recapitalizations: In this scenario, a company opts to raise debt to repurchase shares or distribute dividends to shareholders. While shareholders typically benefit, this approach adds to the company's risk profile due to the increased debt load.
• Refinancings: When existing debt approaches maturity, companies may raise new debt to cover their outstanding balances and defer repayment. LevFin bankers play a role in structuring these refinancing transactions.

Recruiting

In terms of recruiting for roles within LevFin, candidates are expected to possess knowledge in the mechanics of an LBO, bond pricing, fundamental accounting principles, equity and enterprise valuation, and DCFs (albeit, to a lesser extent). Additionally, candidates should demonstrate an understanding of private credit markets, company credit ratings, and financial covenants. Knowledge of credit markets, including high-yield bond and leveraged loan issuances, as well as an understanding of yield curves and creditworthiness determination, is crucial for success in this field. Such expertise is essential for effectively underwriting and managing the risks associated with the higher-yield, lower-credit-quality debt instruments typically involved in LevFin transactions.