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| To see it in action, go here: | | | Welcome back! | I'm excited to have a guest interview/post with Unhinged Capital! | I always appreciate seeing hyper niche, detail-oriented memes, so i appreciate what Unhinged has done so far. | This one from Unhinged is a favorite of mine: | | Two quick programming notes before today's piece: Effective, Sunday April 27th, I'm merging in The Wall Street Rollup into the typical weekly newsletter cadence. We've been operating the newsletters separately, but given the fact that a lot of my newsletter focus is on The Wall Street Rollup, it's time to integrate it into the flow of existing HYH Newsletter readers. You'll be able to opt out of Wall Street Rollup specific posts at any time. | Secondly, I put out a HYH Premium piece last week on a massive list of Credit shops in NYC, this is part IV of my NYC City Guide pieces. | Let's get into it: | | Unhinged Capital's Guest Piece: | Private Credit Playbook: Surviving Your First Year | Congratulations. You read every single WSO thread, memorized all 400 investment banking technical questions answers, and caught a break in your interviews with a "pass" for being an adequately social human. You've made it into private credit. Your parents have no idea what you do, you tell your friends you work in private equity, and your LinkedIn is now a buzzword salad of terms like "opportunistic direct lending" and "illiquid high yield structured solutions." Welcome to the hottest corner of finance. | Now, the bad news: you have no idea what you're doing. But that's okay. No one really does at first. Here's a playbook to help you survive your first year, avoid embarrassment, and maybe even impress a Partner along the way (remember me in your will when you do). | 1. Master the "Nod of Understanding" |
In every IC meeting, there comes a moment when some senior Partner says something like, "It seems the back-leverage facility pref structure here gives us an attractive attach/detach." Do you understand what that means? FUCK no. But that's where the nod comes in. Slight incline of the head, furrowed brow, maybe a soft "Mhmm." Perfect. You are now perceived as wise and contemplative beyond your years. And best of all? All you did was agree with some musing of some crusty guy called Dave on IC. That's called outsourced thinking.
| 2. Excel and PowerPoint Are Your New (Temporary) Best Friends |
If you thought Excel was for simple things like =SUM(), think again. You're in private credit now. Each deal requires "private equity-lite" diligence, complete with base / downside modeling, retention / concentration analyses, ASP / volume trends, roll-forward / roll-back customer and SKU level performance, and FCCR. Sike. You work in private credit. In reality, you're a glorified loan officer with a fancier title getting paid $300k+ as a 1st year for god knows what. And your PowerPoint memos with bulletproof risk mitigants and investment thesis you copied from some old memo? You can disregard all of that…the mitigant for everything is sponsor equity beneath us. Also, don't get too attached to Excel and PowerPoint after your first few years. Every memo and model you put together exists purely to convince IC that some delusional 6.5x stretch senior deal for a consumer cyclical perfume business is money good and down the line when the credit inevitably faces issues and you probably don't even work at the firm anymore, some hapless 1st year associate can reference your legacy and explain to LPs what went wrong. Revolutions my friend. Keep the wheel turning.
| 3. Understand the Deal Process | Navigating the private credit deal process as a first year is like assembling IKEA furniture without instructions in your Murray Hill apartment. Let me explain. | Sourcing: Think back to when you got your offer and suddenly every Partner and MD you never spoke to during the recruiting process reached out to congratulate you. What did they all say in an attempt to sell you to sign with the firm? Was it the strong culture? The learning opportunity in a fast-paced environment? No, it was the robust sourcing engine and their strong relationships with every sponsor on planet Earth (a not so subtle pat on their backs). All you really have to do is sit back and hope your MD gets the call from Warburg to do their cov-lite uni. And that's when you come in. Initial Screen: Gonna be honest, almost every deal you get staffed on is going to scream "train wreck" in this market (you really think a high quality asset with an appropriate capital structure is going to go to the private markets and pay a premium in this macro environment?). Unfortunately, your job as a first year is to slice up the 50 MB data cube like you're playing Fruit Ninja in 2010 again and cobble together pages that make the credit look attractive. Logo retention looks horrendous? Adjust it to only include customers who generate >$X of revenue in the latest year (do it on a look-back basis vs. look-forward for optimal positive skew). Customers highly concentrated in the top 5? Just put a sentence in the memo that you'll dig in in the next round of diligence. All in a good day's work. Structuring: This goes one of two ways. Either the sponsor tells you what they want with no ifs, ands, or buts, or someone senior on the capital markets team cooks up something creative. The former happens about 90% of the time. Also 90% of the time your deals will be a unitranche so consider changing your Linkedin title to Unitranche Lender at [. ]. The 2L, preferred equity, Holdco PIK note investments they told you about during the recruiting process is pretty much fiction. Due Diligence: Now that you know you're doing a uni, you can breathe a sigh of relief because you're dollar one buddy! What does that mean? If shit hits the fan, you're the first one out (assuming you actually have LME protections). The bad news is now you really gotta churn out analyses. Go back into the data room, find the files called "Data cube_vFinal revised final final April 2025.xlsx" or "KPI trending lenders_vFFFF pulled as of Mar25.xlsx" and get cracking. Those price/volume analyses and EBITDA bridges aren't building themselves. You do get a freebie though when the sponsor sends over 3rd party work. Pray the VP sends you which pages to extract. Just lean into your banking skill set and format it well in your memo. IC Committee / Approval (2-5 memos later): Time to face the tribunal. This is where you get a breather. Sit back on camera but on mute and watch your hapless VP present your shoddily crafted memo with nothing to lean on but hopes and prayers. Honestly, it's a game of catching IC at the right time and hopefully in a good mood. If James on IC woke up on the wrong side of tariffs, yeah your deal is as good as dead. After 5-10 minutes of discussion, you either get approval and move to the last step or you get hit with NFW and go back to square one. Documentation and Closing: Assuming James on IC in fact did wake up on the right side of tariffs and you now have unanimous sign off, your deal is now IC approved. As a first year, your job now is just to observe email traffic as legal counsel cooks up some 350 page document which is based on a 340 page precedent (I skipped a few steps in getting here…there typically is a term sheet or commitment papers stage assuming your firm is leading the deal but if you're just being dragged along as a minority lender whatever). Your last task as a first year is to run down a funds flow and also KYC and ensure you're not funding into some money laundering terrorist organization. This is probably more stressful than any other part of the deal. This is where you really have to rely on the back office folks you talked shit about all of training. Hopefully they have your back. Or just be a kind human and treat them nicely. If everything went as planned, congrats, you've closed your first deal.
| 4. The Art of Looking Busy (Traffic Lighting) |
In private credit, you'll occasionally have downtime. Maybe a deal got pushed because the purported $5 million EBITDA business can't even get Joe Shmoe LLC to sign off on its QoE financials, maybe your VP forgot you exist, who the fuck knows. If you want to preserve your sanity, it's good to act busy once in a while and get some personal time. Always make sure you're either green dot or red dot on Teams though. Wiggle your mouse, refresh your Teams app on your phone, I don't care. If you're yellow dot as a 1st year, you're a cost synergy waiting to happen. If you're in the bullpen, have a Powerpoint or Excel open in case the staffer comes by so you can mutter under your breath the universal axiom, "The rel-val here just doesn't make sense." No one will question you.
| 5. Be Proactive for Things that Matter |
If there's one thing that will earn you quiet nods of respect, it's volunteering to do work. Look, everyone wants to be paid but ain't nobody want to do any work. This is where you come in as a 1st year. But don't just volunteer for everything. Never volunteer for those thankless weekly tasks where there's only downside for making a small mistake and no upside. Never volunteer for those amend and pretend deals that are clearly troubled. Volunteer for new platform deals. Even if they don't close, you'll get reps in and build trust within the firm. And once you see enough deals and become a debt whisperer, you'll start casually dropping phrases like, "Feels like there's reprice risk here with a BSL payback of 6 months." Congratulations. You're a Managing Analyst now.
| 6. Take Notes on Calls |
It doesn't matter if you're on a lender call, GLG call, management call, or any other call. Take notes. Also have 1-2 questions in your back pocket you can fire off to look engaged. My go-to was always, "Can you explain the revenue model in basic terms to me?" Obviously don't be a remedial dolt and ask this 57 minutes into an hour long call where the conversation has already turned to structuring asks and it's clear everyone knows the business sells aftermarket auto parts. Jesus. And yes while those lender calls where you're off camera / on mute and the sponsor is dodging every legitimate question like prime Ben Stiller in Dodgeball are inane, still take notes. Power through and pat yourself on the back for surviving another episode of corporate deja vu.
| Final Thoughts: Learn to Love Lending |
Eventually, you'll start to get it. You'll develop an appreciation for the beauty of an appropriately levered capital structure. I still get as hard as an underwriting virgin 10 years into my career thinking about my first 1L / 2L capital structure with an attach/detach at 6x/8x that closed that warm Friday morning in May. Appreciate the little things too. You'll feel a thrill when you spot a $300k private jet cost addback in the QoE before anyone else (send a little quip to the team about this for bonus points). Enjoy the moment you discover you can charge 50 bps more rate by adding a risky PIK toggle option. And one day, you'll casually say, "I actually prefer private credit to private equity." And you'll mean it.
| | A Quick Note from Unhinged on Recruiting for Private Credit: | For associate hires, things have been pretty standardized over the past few years. This could involve using headhunters like Henkel, Amity, and Ratio for both on/off cycle. Timing is around same time as PE for on cycle, but with a longer process that could go a week later. We seem to like people from levfin groups at BBs (GS, Bofa, etc) but also hire from Restructuring & M&A Groups at the independent advisory firms (Lazard, Evercore, et.) We don't really hire from coverage groups as most firms are generalist (some are building out sector teams so something to consider going forward - but obviously if you're from a top coverage team like GS TMT or JPM HC you will get looks. Over the past year, our firm seems to have shifted more toward hire as needed as most teams have visibility into junior runway and don't need more. Firms are planning for natural churn out, internal promos, etc. For example, we were in the market hiring recently but it was just to fill a gap because someone left. | The Analyst Program out of college our firm wrapped up like a month ago. Like many private credit firms, we had a small class. No headhunters were used and instead we worked with college career centers and handshake directly. During hiring, we looked at a good mix of top universities. It's a weird dynamic because most college students want to do IB for optionality, so for Private Credit internships you might not have to be top of class. Regardless, all the resumes we received were very strong and everyone knows how to do a case study / technicals so really the focus was on why credit and on each specific group an intern is talking with. | | That's all for this edition! Thank you Unhinged Capital! Go follow him on Instagram here. | Until next time. | -Harry | In Other News | I put out a HYH Premium piece last week on a massive list of Credit shops in NYC, this is part IV of my NYC City Guide. Make sure to upgrade to HYH Premium if you need access to my credit memo guides, if you're recruiting for buyside roles, and or if you need specific city guides
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| | Investment advice provided by Autopilot Advisers, LLC ("Autopilot"), an SEC-registered investment adviser. The portfolios are in partnership with Autopilot. Past performance does not guarantee future results. Investing carries risks, including loss of principal. As always be smart out there. |
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