Let's Talk Capital Markets

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JHP

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Let's Talk Capital Markets

Postby JHP » Wed Apr 17, 2019 11:27 am

I'm in big law, making a foray into capital markets work (not technically slotted into that group yet--still straddling doing M&A work with other ongoing public company stuff plus whatever capital markets stuff comes up for clients).

I'm interested in securities work generally, and am finding the capital markets to be more or less interesting, but haven't done enough to really get a sense of why people choose the work, up/downsides of that kind of work, how it sets folks up for potential exit options if they should so choose, the general health of cap markets groups and whether cap markets work is especially sensitive to market fluctuations (I would assume it is very sensitive to market dips).

Could folks share insights on the above points, as well as any relevant observations about cap markets work in your region, LA, NYC and Boston in particular?

TIA!

TUwave

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Re: Let's Talk Capital Markets

Postby TUwave » Wed Apr 17, 2019 11:52 am

Also interested as I'm a junior corporate "generalist" in a large east coast city (not NYC) but have been about a 50/50 split between M&A and Capital Markets (which would still include a little M&A and ongoing public work.) I'll have to choose a group shortly and any of the requested info would be helpful.

JHP

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Re: Let's Talk Capital Markets

Postby JHP » Tue Sep 10, 2019 1:32 pm

Bumping/reviving this thread. Hoping some folks can chime in now that some of the OCI forums have quieted down.

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Blessedassurance

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Re: Let's Talk Capital Markets

Postby Blessedassurance » Wed Sep 11, 2019 10:28 pm

What do you want to know specifically about securities/capital markets work?

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Re: Let's Talk Capital Markets

Postby Anonymous User » Thu Sep 12, 2019 1:13 pm

Blessedassurance wrote:What do you want to know specifically about securities/capital markets work?


I'm about to start as a 1st year in the cap markets group at my firm. I was hired during 3L so i'm nervous about the kind of work i'll be doing. Can you talk a little about what work you did as a 1st year and up?

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Re: Let's Talk Capital Markets

Postby Anonymous User » Sat Sep 14, 2019 1:35 pm

Capital markets work at biglaw comes in many different flavors/permutations. All the big firms pretty much do everything: equity, debt, convertible debt, etc., representing both issuers and underwriters depending on the deal. But most firms will also generally have a focus (e.g., representing mostly the underwriters on bond offerings). I think Simpson, Skadden and Cleary (non-exhaustive list) are the firms that come to mind that truly have a more balanced practice in terms of which side you're representing.

It's a repetitive practice. A lot of the practice is just copying and pasting, and there isn't much room for creative thought. The "creativity" in drafting disclosure mostly amounts to searching for 5-10 filings in the same industry/space by other companies and then copying and pasting that in to your current deal and tweaking it. Capital markets work in the context of restructuring can offer more unique issues that require creativity, but doing the securities side of restructuring work comes with its own basket of misery (insane timeline, constant fire drill, etc.)

As a first-year associate, you should expect to get familiar with the backup process and the auditor comfort letter process. Any non-obvious statement about the company's operations/business in an offering memorandum or filing has to be "backed up" by a source. This is similar to cite-checking that you've done for your journal at school. This "backup" source can be virtually anything from articles, third-party reports, internal company data, etc. Comforting process refers to any financial figures about a company. Such financial figures undergo a similar "backup" process, except that the auditors will do this for you. The most common issue you will encounter with the above is that auditors won't comfort certain things, and you will have to go back and forth with them to get them to comfort. If the auditors refuse to comfort, then you will have to go to the company to have them provide a "backup" for that certain figure.

You should also expect to do some type of form check. This means reading through the SEC rules to determine what information is required for a filing a certain form, and ensuring that the filing you're working on is compliant with those requirements.

You will likely do some due diligence as well, but it's not like M&A where you're sifting through a cavernous, never-ending data room. Most of the diligence you do in a Capital Markets practice tends to be "red-flag" diligence where you're looking for material issues at a high level. It doesn't get as granular as M&A diligence and you're typically not expected to draft a diligence report of any kind.

There are more wrinkles to the practice as you get more senior, but I think the above are the general tasks you should expect to handle as a 1st year. It's usually more "chill" than M&A, but that really depends on what deal. Doing securities work for acquisition finance or restructuring or high-yield offering is most definitely not chill.

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Re: Let's Talk Capital Markets

Postby Anonymous User » Tue Sep 17, 2019 1:16 am

Anonymous User wrote:
Blessedassurance wrote:What do you want to know specifically about securities/capital markets work?


I'm about to start as a 1st year in the cap markets group at my firm. I was hired during 3L so i'm nervous about the kind of work i'll be doing. Can you talk a little about what work you did as a 1st year and up?


Will you be in a pure capital markets group or a securities/capital markets group?

As a junior, pure capital markets work involves a lot of due diligence and grunt work.

For due diligence, you do the general due diligence, and then you take the disclosure document (e.g., S-1, S-3 etc.) and “circle up” factual statements and then find “back up” for the factual statement (i.e., you find evidence to support the statement). There’s also the auditor comfort mentioned in the prior comment.

Harder part of this is omissions, which is a major part of the general due diligence (here, you’re trying to find what should be disclosed and wasn’t). Entire point of the due diligence is for purposes of a 10b-5 letter/negative assurance opinion.

You also get to do other things depending on the firm/how good you are/the partner etc. For example, you could start reviewing underwriting agreements as a second year or you could be start doing it as a fifth year. In my experience, the smaller the firm, the earlier you get to do substantive stuff, but others may disagree.

If you’re in a securities/capital markets group, you’ll also do other things, mostly public company reporting (drafting a public company’s 8-K, helping review 10-Qs, 10-Ks, proxy/information statements, handling basic Section 16 issues, drafting legend removal opinions and so on).

Hard to tell you exactly what your experience would be like as it largely depends on your firm (worked with some firms that had the same associates doing the same due diligence stuff year in and year out, and also worked with firms where the third year was drafting the S-1 for the IPO, albeit for a small company).

After about your third year (or maybe later, depending on your firm), the work gets more interesting.

As a junior you’ll also be doing “form checks,” as mentioned, which involves taking the document (e.g., a registration statement), and reviewing it against the applicable SEC Form (e.g., a Form S-1, S-3 etc.) to make sure everything that’s required to be there is there. In the course of doing that you’ll also review what others/similar companies did, as well as other resources (such as practical law).

As you get more senior it gets more exciting (to the extent that any of this can be exciting). It’s not true that it’s largely copy and paste. Certain things are. Example, the underwriters will usually have a standard underwriting agreement, the bulk of which won’t change from deal to deal for companies in x industry. But even then there’s room for negotiation of certain things.

In sum, securities/capital markets can be exciting depending on the firm, although the first year can be tedious. It gets better.

Typing on phone so excuse typos.

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Re: Let's Talk Capital Markets

Postby Anonymous User » Tue Sep 17, 2019 9:47 am

Both descriptions above are pretty spot on. As a second year I started drafting underwriting/purchase agreements, pricing supplements and indentures already. At my firm, first years will draft all the ancillary certificates/closing documents too, along with being the person coordinating with specialists for comments and turning the pro supp / OM. On deals now, as a rising third year, I'll pretty much handle the closing process too. Seniors/partners will generally negotiate the DoN and will provide their comments to the OM (and will review drafts everything I put together).

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Re: Let's Talk Capital Markets

Postby Anonymous User » Tue Sep 17, 2019 10:59 am

Finishing up as a first year doing mostly Capital Markets work. I have already drafted a number of Purchase Agreements/Underwriting Agreements, Indentures/Supp Indentures, and Pricing Supplements/Pricing Term Sheets. I also draft all of the ancillary documents and opinion letters. Agree with the above regarding backup and comfort circles. I've done around 15 bond deals (mix of HY and IG) and a few equity deals (Registered Direct Offerings and At The Market transactions) but no IPOs yet. I have also handled the closing process, including DTC calls.

All this is to say that it is very firm dependent on what tasks a junior can do.

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Blessedassurance

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Re: Let's Talk Capital Markets

Postby Blessedassurance » Tue Sep 17, 2019 2:37 pm

Anonymous User wrote:
Anonymous User wrote:
Blessedassurance wrote:What do you want to know specifically about securities/capital markets work?


I'm about to start as a 1st year in the cap markets group at my firm. I was hired during 3L so i'm nervous about the kind of work i'll be doing. Can you talk a little about what work you did as a 1st year and up?


Will you be in a pure capital markets group or a securities/capital markets group?

As a junior, pure capital markets work involves a lot of due diligence and grunt work.

For due diligence, you do the general due diligence, and then you take the disclosure document (e.g., S-1, S-3 etc.) and “circle up” factual statements and then find “back up” for the factual statement (i.e., you find evidence to support the statement). There’s also the auditor comfort mentioned in the prior comment.

Harder part of this is omissions, which is a major part of the general due diligence (here, you’re trying to find what should be disclosed and wasn’t). Entire point of the due diligence is for purposes of a 10b-5 letter/negative assurance opinion.

You also get to do other things depending on the firm/how good you are/the partner etc. For example, you could start reviewing underwriting agreements as a second year or you could be start doing it as a fifth year. In my experience, the smaller the firm, the earlier you get to do substantive stuff, but others may disagree.

If you’re in a securities/capital markets group, you’ll also do other things, mostly public company reporting (drafting a public company’s 8-K, helping review 10-Qs, 10-Ks, proxy/information statements, handling basic Section 16 issues, drafting legend removal opinions and so on).

Hard to tell you exactly what your experience would be like as it largely depends on your firm (worked with some firms that had the same associates doing the same due diligence stuff year in and year out, and also worked with firms where the third year was drafting the S-1 for the IPO, albeit for a small company).

After about your third year (or maybe later, depending on your firm), the work gets more interesting.

As a junior you’ll also be doing “form checks,” as mentioned, which involves taking the document (e.g., a registration statement), and reviewing it against the applicable SEC Form (e.g., a Form S-1, S-3 etc.) to make sure everything that’s required to be there is there. In the course of doing that you’ll also review what others/similar companies did, as well as other resources (such as practical law).

As you get more senior it gets more exciting (to the extent that any of this can be exciting). It’s not true that it’s largely copy and paste. Certain things are. Example, the underwriters will usually have a standard underwriting agreement, the bulk of which won’t change from deal to deal for companies in x industry. But even then there’s room for negotiation of certain things.

In sum, securities/capital markets can be exciting depending on the firm, although the first year can be tedious. It gets better.

Typing on phone so excuse typos.


The above is me, by the way. Didn't mean to post anonymously.



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