Wall Street Prep Online Training

Debt Capital Markets

Interns & Analysts:
How to Survive Day 1

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About the Instructor

Eric Cheung
• Eric is a Fixed Income expert with 10 years of experience at J.P.
Morgan.
• Eric began his career as an Intern on the High Yield and Project
Finance Loan Markets team at an European Bank in London.
• Eric began his career as an analyst at J.P. Morgan in New York, working
in Investment Grade Debt Origination. Eric moved to the Sales &
Trading side as an Associate, and covered investors who bought bonds.
He moved to the syndicate desk as a Vice President, being a critical
part of the information flow between Sales and Origination .
• Eric has worked with bonds form end-to-end, but today’s focus will be
on what interns and analysts need to know to survive day one on the
desk.

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DCM Interns & Analysts – How to Survive Day 1

Arrive on Day 1
knowing what to
expect

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Arrive on Day 1 knowing what to expect

First, let’s decode some jargon

• DCM stands for Debt Capital Markets.
• Every bank may define what exactly falls within “DCM” and can change that over time. Are
loans part of DCM? High Yield? Derivatives? ABS or Structured Finance?
• Today – we’re going to focus on the traditional DCM role, Investment Grade Bond Origination
• Investment Grade and High Grade are used interchangeably. These are companies rated
Baa3 or higher by Moody’s (and equivalent ratings from S&P and Fitch), and are generally large
blue chip companies.
• Debt: Both Loans and Bonds are both technically debt. The focus today is Bonds, and large
debt issuances that go to hundreds of investors and are actively traded.

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Arrive on Day 1 knowing what to expect

First, let’s decode some jargon (continued)

• Origination: The role is sourcing bond transactions. Senior bankers cover the
treasury/funding teams or potential issuers and provide them with market updates with
market color. They are pitching for future bond transactions and hoping to win a mandate. Once
the transaction is executed, your firm will earn a fee for the transaction.
• Market Color: A general term for market information typically focused on Investor behavior or
demand dynamics
• Pitch: Before a transaction, where a senior DCM banker is trying to convince the client/Issuer
to hire their bank as one of a few banks to lead, advise and underwrite their next bond
transaction.
• Mandate: An official engagement by the client/Issuer that your bank (alongside others) are
hired to be on a transaction. Generally defines fees paid and expenses to be covered.

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Arrive on Day 1 knowing what to expect

From Bond Issuer to Bond Investor Simplified representation

Bond Issuers DCM Teams Syndicate High Grade Bond Sales Investors
(Industry Aligned) (Location Aligned)

Financials New York

Telecom
Chicago
Media Tech

San
Industrials Syndicate
Francisco

Consumer Boston

Natural
International
Resources

This is a simplified representation. Each bank may setup their industry and sales teams slightly differently. Not all sectors are illustrated. Investors mentioned are primarily asset managers,
however Insurers, corporates and state/local governments are also important bond investors

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Arrive on Day 1 knowing what to expect

Where does DCM fit within the Investment Bank?

Other IB Teams you will work with: Other debt origination teams:

• Responsible for the overall relationship • Clients are High Yield companies (rated below Investment
Coverage (including due diligence). More actively involved
Leveraged
Grade) for both Bonds and Loans. High Grade and High Yield
Bankers for transactions spanning multiple products
Finance
Bonds have different market conventions

• Revolving Loan Facilities for a Commercial Paper Emerging • Clients are located in Emerging Markets countries. Both
Loan program are common for High Grade companies Markets High Grade and High Yield and includes both Government
Origination DCM and Corporate Issuers.
• Bridge Loan financing for acquisitions

• Industries with household debt typically use ABS • Clients are Supranational, Sovereign and Agencies with high
ABS as part of their financing strategy (Mortgages, SSA DCM investment grade ratings
Credit Cards, Auto Loans, Cell Phone Leases) • Typically London based but cover global clients

• Partnering in acquisition finance, including • Clients are US Tax-Exempt Issuers (States, Cities, Agencies,
M&A analysis on debt capacity and impact on credit Municipals Non-Profit Issuers)
ratings • Higher concentration of retail investors

Equity • Most high grade issuers are publicly listed ABS / • Clients are managers of Asset backed SPVs (companies or
Capital • Financing share buybacks are a common shared Structured financial institutions). Mostly investment grade issuance
Markets transaction Finance with a small subordinated or SPV equity issuance

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Arrive on Day 1 knowing what to expect

What does your desk look like?

Name Plate

Bloomberg
“IB Chat” 2-3
Monitors

Headset

Turret
Bloomberg
Keyboard
Regular Cell Phone
Mouse
Blackberry

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Arrive on Day 1 knowing what to expect

How to use the turret? (Classic turret) Page Up/Down

Lines

Microphone Different Lines

for “Hoot”

Number
Pad
Volume Mute
How do I dial out?

“Hunt”
New Line

Left/Right Left/Right Release

Hold
Conference Handset “Hang Up”
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Arrive on Day 1 knowing what to expect

How to use the turret?

(New turret) Microphone Page Up/Down
Different
for “Hoot” Lines Lines

Left/Right
Handset
Number
Pad
Volume Mute

Mute

Left/Right
Conference Release
and Hold “Hang Up”

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Arrive on Day 1 knowing what to expect

Who are the key people that you will answer calls from, or dial calls to?

DCM Deal Team Other Calls

Internal (At Your Bank) Personal

Coverage / DCM Bankers Calls
External
Clients Relationship (other team
Bankers members) DCM Bankers
Conference
DCM Bankers at Calls
Legal / other banks when
Syndicate
Documentation you are working on a
transaction together

Roadshow
Coordinator

Working Group List: Once mandated on a transaction, DCM analysts would create a word document with the contact information (Names,
Titles, Phone Numbers and E-mails) of all the key deal team members at their bank. One of the banks will consolidate all the information
from all the banks on the transaction and add on the client’s information. Then the file is circulated with all the deal team members.

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DCM Interns & Analysts – How to Survive Day 1

Starting your day

with a positive
impression

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Starting your day with a positive impression

When does your day start?

• Early. Opening bell for equities is at 9:30am, but there is no opening bell
for Fixed Income as the market trades over the counter.
• There is no “opening time” – but 8am is a good proxy for the bond
markets. New transactions are announced as early as 8am and bond
traders are just about to send out their opening runs. Traders in London
and Tokyo manage the overnight trading books so there is already clear
signs of market sentiment as you walk in the door.
• Most morning meetings are between 7:30 and 8:00am.
• For new analysts and interns – it looks good to arrive early and settle in
before your morning meeting. Plan to arrive around 7am to give yourself
time to have a coffee, eat some breakfast and catch up on the markets
before the morning meeting

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Starting your day with a positive impression

First things to check in the morning

Where is the stock market? What are the headlines? Check my E-mail / Calendar

 Bloomberg: WEIF <GO>  Bloomberg: TOP <GO>  Any tasks that you need to do?
 Where are stock market  What is driving sentiment today?  Research
futures currently trading?  Market Commentary

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Starting your day with a positive impression

The Morning Meeting

• Generally between 7:30 and 8:00 • Market sentiment

When is it? • Start times staggered based on other What is • Trading activity (cash and derivatives)
morning meetings (Credit Sales vs. DCM)
• Deals start getting announced by 8:00am
discussed? • Notable new issues recently priced, size,
pricing and trading performance

• Roughly 15 minutes, designed to be brief and • Seats near the phones are allocated for
cover the key details needed for the day speakers
How long is it? • A team meeting, generally once a week in the
Where • Speakers may attend more than one
afternoon is a forum for longer discussion on should I sit? meeting and may come in late
pipeline and plans
• Stand away from the door

• Research, Trading and Syndicate

• Be prepared, the pace runs fast
• Fixed schedule, and not everyone speaks
Who speaks? • Take Notes, be attentive
every day (i.e. if Research is published Friday,
they may have more time on Monday)
What do I do? • Follow up with questions after the
• Guest speakers are pre-arranged meeting if you missed something

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DCM Interns & Analysts – How to Survive Day 1

What’s in a
pitchbook?

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What’s in a pitchbook?

Key Components
• Economics
• Most pitchbooks will have the following key Market • New Issuance
Update • Issuance Statistics
components. Others will be more complex,
but for your first pitchbook you will most
• Client Specific
likely be asked to update a deck that is quite Pricing • New Issuance Levels
Sheet • Secondary Bond Prices
standard. Many slides are re-used across
different clients, but there will be some • Highlight recent
Case transactions
minor tweaks to highlight transactions for • Transaction overview –
Studies
tells a story
specific clients (same sector)

• League Tables
Credentials • Tombstones

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What’s in a pitchbook?

Market Update
Market Update: Catchy Title to Describe the Sentiment
• Depending on the bank/market, this Commentary: Graphs of Issuance Statistics:
section is generally 1-3 slides long. It can be  Economic
used across different clients and sectors. Commentary
 Sentiment
You are likely doing one of the following: Recent Jan Feb Full
Transaction Year
∘ Updating the commentary and document 2019 2018 2017 2y 5y 10y 30y

for the entire team to use Recent New Issues:

Bond Rating Size T Spread NIP
∘ Taking the update already created and XYZ 3.125 03/2021 Aa3/A+/A+ 500mm T+60 +5 bps
XYZ 4.250 03/2024 Aa3/A+/A+ 750mm T+72 +5 bps
inserting it into a new presentation
ABC 5.375 03/2029 Aa2/AA-/NR 350mm T+110 +5 bps
(likely Day 1 task)

∘ Updating the recent transaction data

(new issues and issuance statistics) but
keeping the commentary the same.

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What’s in a pitchbook?

Market Update (continued)

Market Update: Catchy Title to Describe the Sentiment
• Commentary Graphs of Issuance Statistics:
Commentary:
∘ What moved markets and market  Economic
Commentary
sentiment. Notable new issue  Sentiment
transactions. Focused on the “market”, i.e. Recent Jan Feb Full
high grade bonds, loans, high yield, etc Transaction Year
2019 2018 2017 2y 5y 10y 30y

• Graph of Issuance Statistics Recent New Issues:

Bond Rating Size T Spread NIP
∘ This is an update of what there last week XYZ 3.125 03/2021 Aa3/A+/A+ 500mm T+60 +5 bps
/ last update. Find the backup sheet, XYZ 4.250 03/2024 Aa3/A+/A+ 750mm T+72 +5 bps

update the numbers, and graphs / pie ABC 5.375 03/2029 Aa2/AA-/NR 350mm T+110 +5 bps

chart
Typical Issuance Statistics:
 Total Issued this year to date versus
same period last year
 Pie charts of Issuance YTD: Mix of
Tenors, Fixed vs. Floating, Sectors

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What’s in a pitchbook?

Pricing Sheet
• This is the one client specific page in the presentation, and receives the most attention from the client. The pricing
sheet tells the client where your bank thinks they can issue a new bond, plus provides secondary pricing of bonds from
that issuer, and potentially competitors to support your pricing recommendation.

Make sure client name

Tomato Bank (Aa3/A+/A+)
is updated
2yr 3yr 5yr 10yr 30yr
Reoffer Spread T+45-50 T+55A T+65A T+80-85A T+100A Syndicate provides
Treasury Yield 1.18% 1.38% 1.73% 2.20% 3.50% spreads
Reoffer Yield 1.63-1.68% 1.93% 2.38% 3.00-3.05% 4.50%
Spread to 3mL +12-17 +29A +58A +82-87 +90A
Update and Calculate
Comparables
the Table
Bond Rating Size T Spread G Spread
Ticker Coupon Maturity Aa3/A+/A+ $$mm T+X G+X
XYZ 3.125 09/2020 Aa3/A+/A+ 500mm T+60 G+40
Update the
XYZ 4.250 04/2023 Aa3/A+/A+ 750mm T+72 G+60
secondaries
ABC 5.375 06/2027 Aa2/AA-/NR 350mm T+110 G+90

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What’s in a pitchbook?

Case Studies
• Following a transaction done by
Bank ABC lead a $1bn 5 year Fixed for
your bank, a case study of the Tomato Bank
transaction is sent around both
internally and to clients. Issuer: Tomato Bank
 Transaction
Rating: Aa1/A-
• This serves as a marketing Commentary
Format: 144A/Reg-S
document for other transactions  Oversubscription
Notional: $1,000,000,000
 Price Guidance
and each bank creates their own. d Tenor 5 years
Movements Denoms $250k
• The analyst working on the Coupon: 4%

transaction is generally Conventions: Semi 30/360

Settle Date: 3/20/2019
responsible for the first draft of
the case study.

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What’s in a pitchbook?

Credentials – League Tables and Tombstones

• League Tables compare the relative
Bank ABC is the leading bank for clients just like XYZ
experience of your bank relative to
Rank Bank Notional
competitors. Dealogic and Bloomberg both Jan-2019 Jan-2019

1 Bank ABC 8,325mm

provide league tables as a starting point,
2 Solomon 7,525mm
which can be narrowed done in scope for 3 Lehman 7,121mm
$500,000,000 $750,000,000
particular sectors. 4 DLJ 6,333mm Bookrunner Co-Manager

5 Wachovia 6,110mm Jan-2019 Jan-2019

• Tombstones highlight recent transactions 6 Dean Witter 5,620mm

your bank has worked on. These generally 7 USA Bank 5,335mm
8 Intl Bank 4,125mm
have a date, client logo, size of transaction $1,000,000,000 $250,000,000
Total
and the bank’s role. Depending on the
Lead Arranger Joint Lead Manager
Footnotes to explain the creative math, inclusions and
exclusions to make Bank ABC as the number 1 bank
market, the convention changes slightly of
what you call a lead underwriter.

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DCM Interns & Analysts – How to Survive Day 1

Transaction roles
and responsibilities

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Transaction roles and responsibilities

Key Roles once you are mandated

• With multiple banks on a transaction – roles are clearly defined. The split depends on the number of lead
banks on a transaction. Co-managers are typically not provided roles. Additional roles can be created if
they are more lead banks (such as coordinating dial-in numbers for calls)

Roles divided among the lead banks Roles that are shared:
Market Update Calls – On a rotation basis amongst the lead.
Logistics - Generally done in alphabetical order by bank name. Syndicate
Documentation
Roadshow generally provides the update, but the DCM bankers open up
the call and lead the roll call

Roles each bank provides indiviually:

Screens - Billing & Transaction marketing documentation– Case studies,
Announcements Delivering league tables, tombstones, all the documents that are not part
technically of the transaction, but as an analyst on the deal,
you need to do

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Transaction roles and responsibilities

Documentation
• Most banks have a legal and transaction execution team that is responsible for most of the
documentation. DCM Analysts will need to draft the termsheet and check the economic details
(conventions, coupon calculations, numbers match)

E-RED – Prospectus Prospectus

Termsheet
Supplement ( i.e. SEC Shelf)

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Transaction roles and responsibilities

Logistics/Roadshow
• A roadshow is a series of investor meetings where the company
travels and meets with a number of investors over a short period
of time. The company presents their story and hopes to have the Roadshow Details Continued

investor participate in a future bond transaction. Not all 1pm: Janus Capital
transactions have roadshows, but most roadshows are timed Attendees: Bill Gross
151 Detroit Street
around a potential transaction. Denver, CO 80206
(303)-336-4000
2pm: Car to Denver Airport
• Most banks have a roadshow coordinator that helps arrange 5pm: Flight to Reno, NV
United Airlines Flight 93
flights, cars and hotels. For the bank that is responsible for Arrive: 6:40pm
logistics, the DCM analyst is responsible for updating the schedule Reservation #: ABCDEF
7pm: Car- Town Car International
based on confirmed meetings, with attendees and details of cars, Driver Phone: 212-727-7800
8pm: Dinner – Charlie Palmer Steakhouse
meals and hotels. Reservation Under: Tomato Bank
Hotel: Grand Sierra Resort
2500 E 2nd St, Reno, NV 89595
• The roadshow bank is also typically responsible for reviewing the (775)-789-2000
company’s roadshow presentation.

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Transaction roles and responsibilities

Screens and Announcements

• The bank responsible for Screens and
Announcements is responsible for setting up the
Bloomberg screen for the bond and agreeing with
the Issuer on the announcements messaging.
• Bloomberg announcements typically sent out:
∘ Roadshow announcement
∘ Transaction announcement
∘ Price guidance updates
∘ Launch Message
∘ Priced Message

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Transaction roles and responsibilities

Screens and Announcements (continued)

• The roadshow and transaction announcement
are key ones where there will be discussion
with the Issuer on wording.
• The remainder of the messages follow a
standard template, and the bank that is
responsible for screens and announcements
needs to draft these messages, setup the
Bloomberg screen and check the Bloomberg
screen to ensure it is setup accurately.
Covered more in
Wall Street Prep’s
Crash Course in Bonds

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Transaction roles and responsibilities

Billing and Delivering IssueNet:

A popular system to manage the process

• What is Billing & Delivering?

• This role is often abbreviated as “B&D” and the bank
responsible for this is the “B&D bank”. One bank takes the
responsibility for billing (taking cash from investors for the
bonds) and delivering the newly issued bonds to investors.
Interest rate hedges (treasuries in exchange of bonds) are
also handled during this process if the investor elects to do so.
• This role is typically run of the syndicate desk and the
operations teams supporting new issuers. What you need to
know on a transaction is whether you are the B&D bank or
not, and if not, which bank is.

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Transaction roles and responsibilities

Pot orders and the Syndicate process IssueNet:

A popular system to manage the process

• In most markets, Japan being the key exception, investor orders are pot
orders. A pot order is when investors provides an identical order to all
the banks on the deal. The order is for the transaction, and not bank
specific. If there are 5 banks, and the investor gave 5 $20 million orders,
one to each one of the 5 banks, the investor is expecting at most $20
million of bonds, and not $100 million total.

• The Syndicate team collects the orders, and the reconciles, and
allocates the order book. Once the order books are closed, the syndicate
team reconciles their books, which means to ensure each bank sees the
same orders. There are generally more orders than the planned issuance
size (referred to as oversubscribed), and then the syndicate team
allocates bonds (deciding how many bonds each investor receives).
Once the allocations are finalized, they are sent to investors.

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Wall Street Prep Online Training

Q&A

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