![]() ![]() Several other groups at investment banks also advise on debt issuances the two most similar ones are Leveraged Finance and Corporate Banking. The global credit markets are far bigger than the global equity markets, there are more deals, and the deals happen more quickly – days rather than weeks or months.Īs a result, investment banks charge lower fees than they do for, say, IPOs, and they have to make up for it with higher deal flow. There is some quantitative and financial modeling work, but it is usually not as in-depth as you might think.ĭCM tends to be a higher-volume, lower-margin business than ECM. These memos help get your bank comfortable with deals and provide the sales force with the numbers and analysis they need to ‘sell’ the offerings to institutional investors.įinally, you will also spend a fair amount of time answering requests from industry groups and product groups, updating market slides, and creating case studies of recent debt deals. On the execution side – task #2 – much of your work will consist of drafting memos for internal committees and sales teams. You’ll answer these types of questions and advise organizations on their best options. “We want to raise debt to fund our everyday operations – what type do you recommend, and what should we expect regarding the interest rate, maturity, and prepayment penalty?” Or, a company might ask you something like: Does this plan make sense? What terms could we get on the new debt? What interest rate is necessary for us to come out ahead?” ![]() However, we’d also have to pay a prepayment penalty fee if we do that. ![]() Interest rates have fallen, so we think we could ‘refinance’ by raising new debt at a lower interest rate and using the proceeds to repay the existing issuance. “We have $500 million of debt maturing in 5 years. Responding to requests from other groups, updating market slides, and creating case studies of recent deals.Īs a specific example of task #1, a company might come to you and say:.Pitching clients and potential clients on debt issuances and answering their questions.It’s similar to borrowing money for a student loan or mortgage, but organizations do it on a much greater scale than individuals.Īs a junior-level banker in this group, you’re responsible for three main tasks: “Raising debt” means that an entity borrows funds and then pays interest on those funds – as opposed to equity, where the entity sells a percentage ownership in itself and pays no interest. Therefore, in the DCM Team, you advise companies, sovereigns, agencies, and supra-nationals that want to raise debt. Similar to its counterpart, Equity Capital Markets, Debt Capital Markets is a cross between sales & trading and investment banking.īut that’s where the similarities end: Debt Capital Markets Explained: What You Do in the DCM Groupĭefinition: A Debt Capital Market (DCM) is a market in which companies and governments raise funds through the trade of debt securities, including corporate bonds, government bonds, Credit Default Swaps etc. Or, you might not think of anything at all, since there’s much less information about the debt markets than there is about the equity markets.Įveryone can recall famous IPOs of technology companies, but hardly anyone outside the finance industry can name a “famous” debt offering.ĭebt is lower-profile than equity, but it also offers many advantages – both to the companies issuing it and the bankers advising them in the context of DCM. If someone tells you, “I work in Debt Capital Markets (DCM)”, you might immediately think: Bond. ![]()
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