Boss says one thing and does another
Not sure if you guys have experienced this but my boss is incredibly picky when it comes to reviewing deals other people on the team bring in but when it comes to his own relationships and deals he sources from them he throws out all his criteria out the window.
For clarity, we are a lending fund and below are some prime examples of this double standard.
Transaction A: Not sourced by him.
-7% LTV against a basket of 12 late stage VC companies. Structured as first lien debt.
-18%/annum PIK with a minim 1.6x and 3 year maturity.
-full security over underlying assets with 100% cash sweep.
He didn't like the above deal for a variety of BS reasons.
His deal:
-Pref. equity against a basket of 3 companies of really mediocre quality.
-55% LTV.
-10%/annum PIK with minimum 1.2x
-4 year maturity
-25% cash sweep to us, 75% to borrower.
-no security over assets, just bank accounts.
This happens ALL the time in the industry. People are much more open towards opportunities they source themselves and work extra hard to find an angle.
Yep. I agree. I think if he sourced something where the spread was 200 bps difference then none would bat an eye but we underwrite to 15%+ and he is plugging 10% paper which frankly has the same risk profile as the 15% stuff.
This is why more established shops have underwriting and risk management teams segregated from originations folks.
I wouldn’t be afraid of calling him out on it assuming you have a good relationship. He should be able to easily explain why he views his deal as being a better risk to take.
Ya already done. It was kind of embarassing tbh. His view was that there was lower risk since the counterparty is a friend of his / known to him. I still don't think that justifies throwing out 10% paper to your buddy when we are trying to generate a certain threshold of returns for our LPs.
Please PM me the name of your shop so I can auto filter out any marketing materials.
Joke aside, good for you for standing up. Hopefully he’ll come to his senses. Looks tough on a few levels.
Starts with a T ends with U.
;)
Quo rerum minima consectetur perspiciatis. Perferendis qui consequuntur magni dignissimos commodi aspernatur cumque. Eaque sapiente tempora sed ut laudantium maiores dolorem.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...