2nd year in coverage looking at PC as a potential exit. What kind of modeling do you do in Credit? Is it quick and dirty LBOs, do you ever build full operating 3SMs? I’m prepared for lbo case studies but just wanna assess what the actual modeling is like on the job, as I’ve figured out modeling is one of my least favorite things to do, especially with how granular things can get on the sellside during a deal. Thanks in advance and excuse my ignorance!!

Depends on the business. For MM/UMM sponsor-backed deal on a tight timeline, we are generally just taking the management projections and overlaying on our own LBO template and then seeing what x% haircut does as a base case and then for our downsides we like to see 1. where does this thing break and 2. what do we think a likely downside is. For hairier deals we will build our own LBO (IS/CFS/no BS)

My team does 3SM but does not go to the LBO level. Varies by team/firm and whether you have a chance for equity upside (warrants, etc). Make sure to build out a separate debt schedule tab with a few different types of debt that roll into the 3SM. If you’re lending against collateral you’ll also want to show how the LTV changes over time. DM if you want to discuss further.

Private Credit Modeling

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