DCM teams are tasked with advising clients looking to raise finance on what type of debt will best meet their needs and on what terms. They are involved in every aspect of structuring and executing debt transactions – working with clients to determine the right structure, working with lawyers to document the deal, and working with the syndicate team, sales force, and trading desks to price and distribute it.
This creates plenty of work for DCM bankers at all levels as companies issue debt more frequently than they issue shares. DCM is a high-volume, but low-margin, business – you’ll have to work on more deals in order to generate the same level of profits as your ECM counterparts, but thankfully there’s less need to pitch to investors than during an equity deal.
Some banks separate their debt teams into government and corporate debt issuance. Although government debt is typically rated less risky in terms of a likely default, a career on the government side is no less interesting. “You can make a difference in terms of how countries can address the challenges in their economies. You get real exposure to what’s happening in the world,” says Maryam Khosrowshahi, head of public sector debt coverage for Central Europe, the Middle East and Africa at Deutsche Bank.
You’ll also be required to obsessively keep track of market trends – new issues, demand drivers and rumours
Debt teams can also be divided between public companies and private placements. Within this, like ECM, debt bankers will focus on a particular sector, such as aerospace or mining. Financial institutions account for about 50% of all debt issuance, so banks tend to have a separate team focusing on different elements of the financial sector.
Junior DCM bankers will spend much of their time creating financial models and drafting pitch books, much like their counterparts in ECM and M&A. However, you’ll also be required to obsessively keep track of market trends – new issues, demand drivers and rumours – and may occasionally be asked to attend deal roadshows with more senior bankers.
Other potential tasks for DCM juniors include pulling credit-rating reports for clients and sending administrative documents to lawyers. You may find yourself helping to draft term sheets or memos for your bank’s sales team so they can better understand the deal when pitching to investors. And you may also have to help the syndication team – who come in at the end of the process and ensure the deal goes to market – allocate orders between different investors. On days when there are no deals happening it’s your chance to work on market-update presentations and produce post-deal analysis for clients.
Whatever your tasks on a particular day as a DCM junior, you will be under pressure to perform them
Whatever your tasks on a particular day as a DCM junior, you will probably be under pressure to perform them – if your bank's clients are seasoned borrowers they can often access the debt market in a matter of days. “This week, for example, we needed to approve, in a very short time frame, the bank’s support of the financing of a multi-billion acquisition at a time when markets were notoriously volatile,” says Demetrio Salorio, global head of debt capital markets at Societe Generale.
As banks are essentially offering similar DCM services, they have to convince clients that their firm is the one to use. So before debt-related products can be created, deal ‘originators’ are deployed to bring in new business. These are senior bankers, usually at director and managing director level, who spend a lot of time travelling to clients to gain an insight into their financing needs. “In past few weeks I’ve flown to Africa or Eastern Europe or Central Europe every week,” says Khosrowshahi from Deutsche. “I travel to visit clients and discuss new ideas for deals we can execute. And when a deal comes to market I will travel to accompany our issuers to meet investors.”
Senior executives in DCM must also ensure they keep up to date with market trends. “If I'm at the office, I start by attending an early morning meeting with both the DCM and syndicate teams at which the main events of the previous day and the likely evolution of markets and client-issuing opportunities are debated,” says Salorio. “The rest of the day can be very varied: I attend credit committees where complex loan and bond transactions are discussed, I spend time dealing with business strategy matters, I participate in meetings that monitor the launching of new activities, and I also call clients directly to discuss high-level market dynamics.”