GCM Products Flashcards
(19 cards)
Convertible Bonds
ECM (ECM derivatives/Structured equity)
Explanation - Hybrid security: bond that pays interest like debt but can convert into equity shares if the stock price rises above the conversion price. Attractive to the firm as interest rates usually lower than straight debt.
N - Raise money with lower immediate cost when companies want flexibility/expect strong share price performance
U - Fast, 1-2 months (in between IPO and block trade)
S - Good for companies with low, even non-investment grade credit, straight debt would be too expensive but don’t want to immediately dilute ownership via equity
D - Only dilutes if share price does well and investors convert
Equity Private Placement
ECM
Explanation - Selling equity shares privately to a small group of institutional or accredited investors without public offering
N - Raise equity quickly and discreetly, in volatile markets or company doesn’t yet want exposure
U - Fast, 1-2 months (faster than IPO and quieter)
S - Focus is instead on business model, growth potential, profitability, and exit opportunities
D - Yes, depends on how many shares sold
FPO - Follow-on Public Offering
ECM
Explanation - a company that is already public issues additional new shares to raise more equity capital
N - raise additional equity for expansion/debt repayments/acquisitions
U - moderate, 2-3 months
S - need strong fundamentals, stable equity market conditions, and a convincing reason for needing capital
D - depends on how many new shares
IPO - Initial Public Offering
ECM
Explanation - first sale of shares by a private company to the public, listing the company on the stock exchange, including prospectus, investor roadshow, due diligence (private company -> publicly traded one)
N - Raise substantial capital for growth, acquisitions, debt repayment or allow early investors/founders to exit, brand visibility
U - Long 6-9 months (12+ even)
S - need strong financials, a good growth story, and governance readiness, for investors to be confident
D - typically 10-25% of total ownership
Accelerated Bond Issuance
DCM
Explanation - faster than normal bond issuance (compressed documentation, marketing, syndication, regulatory checks) to take advantage of small market window or to meet an urgent need
N - Quickly raise debt capital when timing is critical
(before interest rates rise, or to meet a pressing refinancing deadline)
U - Fast 2-4 weeks
S - more common for investment-grade companies, better for repeat well-known borrowers
D - no dilution
Standard Bond Issuance
DCM
Explanation - Public offering of bonds
- Structured marketing, roadshows, distributions to conservative fixed-income investors, book building
- Pricing based off treasury rates (on government bonds) and credit spread (company’s risk vs gov risk)
- high-yield bonds offer higher interest rates (yields) to compensate investors for higher risk of default.
- Sold publicly to the market through roadshows and bookbuilding, but require fewer disclosure requirements than IPOs
N - Raise long-term, low-cost debt to finance operations, refinance existing debt, fund capex or acquisitions while preserving shareholder ownership
U - Standard 1-2 months (longer for lower credit ratings)
S - investment-grade credit rating (BBB-/Baa3 or better) for investment-grade and lower for high-yield
D - no dilution
Private Debt Placement (Investment-Grade)
DCM
Explanation - Private offering of debt directly to a small group of institutional investors (instead of issuing bonds publicly on the open market)
N - Quickly and quietly raise debt (medium-long term) without publicity, cost, or complexity of public issuance (often confidentiality is important)
U - Fast, 2-6 weeks (faster than full public bond offering)
S - investment-grade credit rating (BBB-/Baa3+) Typically used by strong credit companies wanting discretion or speed
D - no dilution
Standard Bond Refinancing
DCM
Explanation - A company issues new bonds to repay existing bonds that are maturing soon. Normal part of debt management, ensuring the company maintains access to funding without large cash outlays
N - Smoothly replace maturing debt with new long-term debt, keeping balance sheet healthy without using internal cash, avoid default on maturing obligations
U - standard 1-2 months, planned months ahead to match upcoming bond maturity dates (6-12 months)
S - no minimum but easier and cheaper for better credit ratings, very hard for distressed companies (CCC)
D - no dilution
Revolver Drawdown
LevFin, often joint with Corporate Banking
Explanation - Revolver (revolving credit facility) is a pre-agreed line of credit between a company and a group of banks. A drawdown means the company borrows cash from this facility when needed, up to the agreed limit, and repays later. Almost like a corporate credit card (flexible, reusable)
N - short-term liquidity for working capital, emergency cash needs, funding gaps between longer-term capital raising
U - Immediate (same day-few days as already negotiated)
S - easier for better credit ratings, lower covenants, cheaper
D - no dilution
Emergency Private Debt
LevFin
Explanation - Privately negotiated, very fast-arranged debt provided to a company in urgent situations where traditional public markets (bonds, equity) are too slow/volatile/unavailable.
N - Provide immediate liquidity to avoid default/fund critical operations/bridge the company through a crisis until longer-term funding is possible
U - Very fast 1-3 weeks
S - poor credit rating, below investment-grade hence cant access bond markets
D - no dilution
Bridge Loan
LevFin
Explanation - Short-term loan (6-12 months) designed to “bridge” the company until longer-term financing can be arranged.
Urgent funding is needed for an acquisition/refinancing/temporary liquidity, but permanent capital isn’t ready yet
Expensive
N - Provide interim funding to complete a deal or refinance maturing obligations, expectation that it will be replaced later by longer-term financing
U - Very fast, 2-4 weeks
S - no specific but easier/cheaper if higher
D - no dilution
Private High-Yield Placement
LevFin
Explanation - Private offering of high-yield bonds to a small group of institutional investors
(avoiding public market scrutiny, speeds up the process, more flexibility on terms)
market conditions volatile or timing critical
N - Quickly raise large but risky capital
U - Fast 2-4 weeks
S - company is sub-investment grade so higher yield is demanded
D - no dilution
Term Loan A (TLA)
LevFin
Explanation - Senior secured loan typically arranged through a syndicate of banks.
- It is amortising, so the company repays portions of the principal over the life of the loan, not just at maturity.
N - Raise secured, lower-cost debt with structured repayment to fund acquisitions/LBOs/refinancings etc
U - Standard 1-2 months
S - easier if better
D - no dilution
Term Loan B (TLB)
LevFin
Explanation - senior security loan like TLA but structured specifically for institutional investors instead of banks
- Non-amortising, so almost all the principle is repaid at maturity, appeals to investors who want stable cashflows from interest, not principal repayments
N - Raise long-term, flexible, secured debt with minimal early repayment burden for the company, often for LBOs/large M&A
U - Standard 1-2 months
S - lower, so higher cost than TLA
D - no dilution
ABB - Accelerated Bookbuild
ECM
Explanation: super-fast, institutional-only share sale done to quickly raise capital or allow big shareholders to exit with minimal market disruption.
N - Raise capital fast without doing a full marketed offering.
U - Very high urgency, few hours/overnight/1-2 days max
S - reasonable financial strength and decent investor confidence
D - Typically 5–10% dilution, smaller than an IPO, company manages dilution carefully to avoid hurting stock price.
What does ECM do?
Equity Capital Markets (ECM):
- Execution-focused product team that advises clients on equity, equity-linked and equity derivative products, including IPOs, follow-on offerings, convertible bonds and derivatives.
- Provide judgement and advise on optimal transaction structures, timing, sizing, amongst other key execution considerations
- Work closely with public, private, government and private equity clients, acting as a bridge between them and the global equity investor base
What does FICM do?
- Support Senior Bankers in the coverage and origination of business for FIG, Corporate and SSA clients in relation to debt financing; this includes regular pitching through meetings, broader capital and issuance strategy planning, weekly updates on markets and debt pricing across the capital structure and currencies for the clients.
- Work closely with internal teams across IBD, GCM and Sales & Trading on regular market analysis for clients to outline solutions to their financing needs and broader strategy; these might include M&A financing, capital planning, roadshows and swap executions.
- Execute live transactions collaborating with clients, investors, syndicate desk and traders, as well as other banks.
What does LAF do?
Leveraged & Acquisition Finance (LAF):
- Generate ideas / act on debt origination opportunities for sub-investment grade rated corporate and sponsor-owned clients (debt origination opportunities broadly consist of (1) general corporate purpose financing, (2) refinancing of existing debt, (3) dividend recapitalisation, (4) leveraged buyout financing. These opportunities can be executed via two types of facilities: high yield bonds and leveraged loans).
Once mandated, work closely with internal teams across IBD and GCM to bring clients to the rating agencies where they will receive either a debut rating, or in the case that the client is already rated, a ratings update (which will take into account the latest financial performance of the client, the forecast business plan, the proposed transaction, and other details)
After the client receives an updated rating, enter the live execution phase, in which we work closely with internal teams across IBD, GCM and Sales & Trading, to conduct marketing exercises with investors / lenders, until the proposed facilities are priced and allocated
Block trade
ECM
Explanation - A block trade is the sale of a large number of shares, typically by an existing shareholder, executed quickly and privately (often through an investment bank) to minimise impact on the market price.
N - help a major shareholder sell shares without disrupting the stock price.
U - immediately (few hours-1 day)
S - not relevant, more about company progress
D - if secondary, so shares just changing hands, no dilution but if from company itself than dilution depends on number
