Not only can the term “mezzanine” refer to different types of debt (or equity!), but it can also mean slightly different things for normal companies and properties.
If you poke around online, you’ll find not only dozens of different terms and definitions, but also equal discussion and debate.
Some people argue that mezzanine funds are a great alternative to traditional private equity, while others claim that even sell-side investment banking roles beat mezzanine from any perspective.
In this article, we’ll evaluate these views, discuss what “mezzanine financing” means, compare and contrast the field with similar areas, and go through interview questions and answers, case studies, and the job itself:
Definition: “Mezzanine” refers to loans that sit between Senior Debt and Common Equity in a company’s capital structure; mezzanine funds invest in these loans and aim to earn annualized returns in between the typical IRRs targeted by Senior Debt and Common Equity investors (e.g., in the 10-20% range).
The most common instruments that fall under the mezzanine category are Subordinated Notes and Preferred Stock.
These are the general characteristics of mezzanine – the instruments vary quite a bit, and different funds pursue different strategies.
For example, some mezzanine funds focus on the equity side and pay more attention to the company’s potential upside and its possible value in an exit scenario.
They may even co-invest in a company’s common equity along with the private equity firm completing the deal.
Other funds – probably the majority – are credit-focused and care more about avoiding losses while earning an IRR in the mid-to-high teens.
“When making mezzanine debt investments, Oaktree targets companies with sustainable cash flows, proven management teams, strong market positions, and diversified, well-developed businesses. As previously discussed, we have a conservative bias and employ a loss-avoidance approach.”
Mezzanine investors take on far more risk than senior lenders because in a bankruptcy, mezzanine investors are junior to senior lenders and cannot claim any of the company’s assets as collateral.
Because of this much higher risk, mezzanine investors require higher yields that are often closer to equity IRRs.
Going back to the Oaktree example, here’s an illustration of its targeted returns allocation in mezzanine deals:
Understanding Private Credit: Where it Fits and How it Performs in Investors’ Portfolios
Overview of Private Credit
Similar to private equity, recruiting for private credit is composed of 4 to 5 rounds of interviews, which include a round dedicated to a case study and/or model test. Interviews consist of technical, behavioral and fit questions, with technical questions being geared towards debt- or credit-related topics.
The recruiting season typically begins one year later than private equity, starting in late Fall of an analyst’s 2nd year, although many funds, especially smaller ones, will just recruit on a need basis. As such, we would estimate that Private Credit has more off-cycle recruiting opportunities than Private Equity.
Paths to Private Credit
The most common path to getting an interview at a private credit fund is through headhunters who usually reach out directly to analysts through your professional email.
The largest credit funds such as Carlyle, KKR (both Henkel), Oaktree (Amity) and GSO (SG Partners) rely on the headhunters they use for private equity recruiting. Many private equity mega funds have large credit arms. Regional or smaller funds (<$5B AUM) often post directly to job sites or use lesser known recruiters. When speaking with headhunters, make sure to have your story nailed down as to why you are pursuing private credit over private equity.
Opportunities are available to anyone working in investment banking, but the most common paths to Private Credit are candidates from:
For those not currently in any of these fields, it is highly recommended that you lateral to one first in order to get related work experience and better access to recruiting pipelines.
For commercial and corporate banking analysts finding it difficult to get interviews, a common path is to transition into a LevFin group (whether internally or lateral) before recruiting.
Contrary to private equity, it is not uncommon to see analysts that were promoted to associates in investment banking also move to private credit.
Private Equity Interview Questions and Answers
The types of questions asked in a private equity interview can be broken into four categories:
Understanding the fundamental LBO concepts is essential to perform well on the LBO modeling and case study portions of the interview, as well as to showcase your judgment during investment rationale and deal discussions in the later stages of the recruiting process.
Generally, the standard technical questions are most applicable for interviewees from non-traditional backgrounds and are less common for more experienced candidates. Nevertheless, the following article still should serve as a helpful refresher for those that have completed a stint in investment banking.
Let’s move on straight to the top private equity interview questions now!
PILOT INTERVIEW Questions And Answers! (How to PASS an Airline Pilot Interview)
1. What is CRM process as Airline Pilot? The systematic and effective use of all available resources to ensure a desirable outcome and completion of the flight. Focusing on communication, teamwork, task allocation, decision-making and situational awareness. The major contributors in the CRM process are: Dispatchers, flight attendants, maintenance, ATC and of course the cockpit crew.
2. What is the MAP on a non-precision approach? Non-precision: MAP is usually visually identified by a capitol and bold “M” in the Jepps or at the end of the solid line on NOS. There are several ways to id the MAP: Published DME at the MAP, Navaid such as the middle marker (MM), or timing from the FAF
3. What is the importance of proficiency in several languages for a pilot? A private pilot may limit himself to knowledge of English good enough to understand control towers. Other pilots, being more publicly involved figures by necessity, greatly benefit from knowing more than one language.
4. What is your Proudest accomplishment? Becoming a pilot and graduating from college as to be the biggest accomplish so far.
5. What is the 1-2-3 rule? Requirements for filing an alternate. 1-2-3: 1hr before to 1hr after estimated time of arrival, the weather must be forecast to be 2000′ ceiling and 3SM vis.
6. What makes a good captain or what do you expect from a Captain? one that is knowledgeable, decisive, conservative and safety conscious, good people skills, superior communication skills, solid piloting skills, can manage stress and avoid confrontation
7. List your qualifications as a pilot? Besides relevant college degree(s), pilots graduate from flying school and participate in annual additional training.
8. What is GRID MORA? It’s an altitude derived by Jepp or provided by state authorities. If derived by Jepp, Grid MORA clear all terrain and structures by 1000′ in areas where highest elevations are 5000′ MSL or lower. MORA values clear all terrain and structures by 2000′ in areas where highest elevations are 5001′ MSL or higher. Grid MORA (State) altitude supplied by the State Authority provides 2000′ clearance in mountainous areas and 1000′ in non-mountainous areas. Also… a +/- denote doubtful accuracy but are believed to provide sufficient reference point clearance.
9. What is the definition of CRM? CRM is a system which allows optimum use of all available resources – equipment, procedures, interpersonal communication, team work – all to promote safety and enhance efficiency in operations
10. What is Vso of your most recent aircraft? Cessna 172 is 41Kts
11. What is the max distance from the runway if you were to circle to land? Depends on your speed
12. Have you applied anywhere else? Just be honest on this one. If you are in the job hunt, it’s normal to apply to several companies. It’s great to tell them that Cathay is your top choice, but it would be suspect to say Cathay is your only choice.
13. What is mach tuck? As the aircraft reaches critical mach the nose of the aircraft tends to pitch downwards due to the flow of air over the wing reaching supersonic speeds producing additional life and center of pressure moving rearward. As the center of pressure moves rearward the elevators become less effective, pushing the aircraft into a potentially unrecoverable dive.
14. What is tower’s NORDO signal to be cleared to land? Steady green
15. What is VMCG? minimum speed control in the ground
16. What is the difference between Blue, Green Airports? blue is IFR (has approaches) green is VFR (no approaches)
17. What is GRADIENT CLIMB? 3%
18. What is VMCA? Minimun Speed Control in the Air
19. What is windshear? its a change on direction and speed of the wind
20. What is MOCA? Minimum Obstacle Clearance that provides obstable clearance between Vor airways. It also ensures VOR coverage 22nm from the nearest VOR
21. What is hyperventilation? hyperventilation is when the body has too much Oxygen and not enough Co2
22. Ever had an emergency? yes, many over the years
23. Pilots have many simultaneous responsibilities during the flight. What can you tell me about this? Pilots navigate the flight, observe and direct the activities of the crew, check instruments, keep an eye on the weather, and monitor altitude and air traffic. Doing all these and more, often simultaneously, requires outstanding multi-tasking skills and power of concentration.
24. What are the max airspeeds in C airspace? 200 KIAS within 4 NM of Primary Class C Airport
25. How would you behave as the pilot of a plane during an emergency? Describe first what your emotional response would be. It is important to demonstrate, preferably through examples, that you can maintain your poise during such events, and that you possess enough presence of mind to activate emergency procedures and delegate duties among crew members as necessary.
26. Where do you see yourself in 6 months? with your company
27. Did you ever have to modify the flight course in the past? Pilots are able to modify the course in flight, if this is dictated by internal or external conditions. This is not a small responsibility and needs careful coordination with control towers and scrupulous attention to detail.
28. What Is V2? takeoff safety speed
29. What Is Max A/s In Class C? Airspeed maximum of 200 knots indicated within 4 nautical or 5 statute miles and 2500 feet above the ground of the primary airport.
30. What Are The Cdi/raim Sensitivities Of A Gps Outside 30nm? Inside 30nm? +- 5 mi +- 1 mi
31. What Is The Effect Of Aft Cg On Performance? rearward Cg gives better fuel efficiency
32. What Is An Lda? a precision approach that is offset from the runway, it may have GS
33. Where Is The Faf On A Vor/ils Approach? On a VOR approach, the FAP is whenever you are established on course inbound and the final decent may be started. For non-precision approaches, the FAF is the “Maltese Cross” and for precision, the arrow which identifies the GS intercept.
34. Why Cape Air? big airline paneer
35. What Kind Of Airspace Is Around Lax? Class B. Very congested airspace.
36. What Is V1? Take off decision speed
37. What is hypoxia? Lack of oxygen to body tissues
38. Why do you like Compass? I like the new modern equipment and I like the fact that it’s got flow through to/ is part of Northwest.
39. What is a squall line? It is a continuous narrow line active of thunderstorms ahead of cold front but can develop far removed of any front. May be too long to detour, too thick to penetrate. It forms very rapidly reach Max intensity in late afternoon or early evening. IT IS THE SINGLE MOST INTENSE WEATHER HAZARD FOR AIRCRAFT.
40. Why do you want to work for Allegiant? growing company, day trips, upgrade potential
41. Why Ameriflight? I’d like to fly cargo and gain the single-pilot IFR experience
42. Did you ever have a problem with an F/O? Yes
43. What is your clearance limit when cleared for the approach and then you loose coms? The published hold on the missed.
44. What is MEA? Minimum En Route Altitude, lowest altitude on that airway that assures obstacle clearance and acceptable navigational reception.
45. What is Definition of V2? Single engine climb speed until safe altitude or clear of obstacles
46. What is Definition of V1? on a balance runway it is the last chance for you to decide not to go if you have and emergency and still stop on the runway according to the air data
47. What is the definition of Hypoxia? Not enough Oxygen
48. What is the seating capacity of the Dash 8 100 and 300 and how many flight attendants you need? DA-100 (37) DA-300 (50) FA 1
49. Tell me the biggest factor as far as fuel conservation goes as it relates to a jet engine? TSFC thrust specific fuel consumption which directly inperpolates to power setting and altitude. Higher you climb the less fuel required. Throttle settings also have a say in conservation and relates more to maintenance issues which is why full throttle takeoffs are rarely done.
50. What qualities make a good captain? Confident, Diligent, Good CRM skills, Good Problem Solver
51. What’s your choice of base? PDX or Seattle
52. World Airways Pilot Interview Questions:
53. Flight Express Airline Pilot Interview Questions:
54. Lion Air Airline Pilot Interview Questions:
55. LAN Airline Pilot Interview Questions:
56. Miami Air International Airline Pilot Interview Questions:
57. Mokulele Airlines Pilot Interview Questions:
58. Ryan International Airlines Airline Pilot Interview Questions:
59. Seaborne Airlines Pilot Interview Questions:
60. XOJET Airline Pilot Interview Questions:
FAQ
What does private credit analyst do?
What questions are asked in credit analyst interview?
How much do you make in private credit?
- Tell me about your educational background.
- What was your favorite class in school?
- What websites do you regularly follow?
- What book are you reading right now?
- Why do you want to work as a credit analyst?
- Why do you want to work for our company?
