Leveraged finance

What is leveraged finance?

The Leveraged finance department of a bank is the one that specializes in structuring and financing LBOs (leveraged buyouts). Its clients include French or international funds that invest in LBOs (private equity funds). Banks generally have a Large Cap department for large transactions and a Small & Mid Cap department for smaller transactions. This is because the players (clients, lenders, etc.) as well as the structuring of deals tend to be different depending on the size of the transaction.

The Leveraged finance department is in charge of studying clients’ financing requests and having them validated by the risk department. This work involves analyzing the company (its market, positioning, strategy, prospects, etc.), modeling its cash flows, structuring the financing, and, at the end, presenting the file to the risk department. Assisted by its lawyers, the department is also responsible for negotiating the loan contract with the clients. Finally, it manages the bank's exposure once the financing is provided. The bank can decide to keep the entire financing on its balance sheet or to distribute it, in whole or in part, either to other banks within the framework of a syndication, or to investors. The distribution itself is managed by the bank's syndication department, which deals directly with the other banks or goes through the trading room to sell the financing to investors.