What is Loans Trading?

[Snownation]

Hey guys,

I've landed an interview doing Loans Trading. I'm a student, so this is a graduate scheme.

Could anyone give me more details on what Loan Trading is? I'm keen, but have yet to know further exactly what it is, so I can have a better pick at my available choices.

Help greatly appreciated! Thanks!

 

[Snownation]

Anyone have clues?

 

[CHRISTO9HER]

Could be wrong, but since you asked for clues.........

I would imagine that this is what is normally called credit trading. When a bank is involved in lending/borrowing a trader actually has to hold those loans on his books. Value of credit can go up and down just like anything else, and can therefore be traded like anything else. The main point is that credit is usually an Over the Counter agreement, therefore implies default risk. The trader has to manage this risk. I would think that this kind of trader is as much a risk manager as he is a prop trader.

Could someone more knowledgeable than I clarify further?

 

[Snownation]

Hmm, good start! Thanks!

 

[A Dashing Blade]

It's gonna help a lot if you tell us with whom you have an interview

 

[Snownation]

WestLB AG.

 

[A Dashing Blade]

Hmmmmm, not a bucket shop then.
I'd guess some sorta structured credit team.

 

[Don-e]

How come you applied without knowing what the job was - do you have to make a general grad scheme application and then a certain department decides they like your CV or something? I'm assuming that's why you're in the dark about the job you're interviewing for....

Never went on a grad scheme meself so it's a part of my job that I have no first hand experience of.

GJ

Could be some kind of Leveraged Loans/or Loan repackaging role? Lev Loans are generally used by LBO's to raise finance. Lev Loans are secured, and have a higher debt seniority... typically pegged to a floating rate like Libor.

Might be worth reading up on secondary market refinancing instruments like 2nd Lien Loans?

Cheers,

Don-e

 

[Snownation]

How come you applied without knowing what the job was - do you have to make a general grad scheme application and then a certain department decides they like your CV or something? I'm assuming that's why you're in the dark about the job you're interviewing for....

Never went on a grad scheme meself so it's a part of my job that I have no first hand experience of.

GJ

You got it right. I basically applied to a Graduate scheme named Sales and Trading, and it could be anything ranging from equity derivatives to fixed income.

Loan trading were the first ones to get back to me offering me an interview.

Thanks for the info everyone!

 

[harpreetset]

Loan trading is done by most of the alternative investment banks. The example of this could be Citigroup, which has a department called CAI primarily deals with alternative investments like fixed incomes, private equities, hedge funds.

To understand Loan trading we need to first see what is Leveraged loan. some banks dont just give loans to borrowers but arrange loans by attracting various investors for paying out loan. Say company A visits a bank for a loan of $1B. Bank cant arrange all the money in one go so it will go to alternative investment bank for the amount. Alternative investment banks, creates a facility for company A and asks big investors to invest money in that facility. alternative investment bank uses money of investors in trading and pay off the loan amount to company A. In returns alternative investment bank gets loan interest. and also invested money gives good return to make investors happy.

I hope I havent confused anyone.