Top 5 Lazard Interview Questions and Answers
Lazard is one of the most storied investment banks in the world with a history stretching back over 172 years.
Recruiting for Lazard is a bit distinct compared to other leading elite boutiques (EBs). Lazard's summer analyst interviews will be for a generalist position and at the end of the summer you'll be able to select your preferred group (restructuring is generally the most sought after and competitive to get placed into full-time). On the other hand, you'll be able to recruit directly for Lazard's restructuring group if you're applying as a summer associate.
This stands in contrast to PJT, Houlihan Lokey, and Evercore where both summer analysts and associates recruit directly with their restructuring groups. It also stands in contrast to Moelis and Centerview that have a generalist program throughout the summer program and one's first few years at the firm.
This creates a bit of a tricky situation for undergraduate candidates dead-set on doing restructuring. While Lazard has a very strong practice, you do run the risk of not landing in RX full-time even if that was your preference (given how competitive getting into the RX group is).
In terms of general advice when interviewing with Lazard, I'd say two things.
First, if you're an undergraduate your interviews will be primarily M&A-focused. You may get some restructuring interview questions, but they will be in the minority of your interview questions. When asked about what groups you're inclined towards I wouldn't be too definitive in saying restructuring. This is because (quite obviously) your interviewer knows how competitive RX is and they don't want you to recruit elsewhere full-time if you can't get into the RX group. Feel free to say you have a particular interest in restructuring, but you should leave the definitive impression that you're open to traditional M&A as well.
Second, if you're a summer analyst at Lazard who wants to be placed in restructuring full-time then you should have a reasonably strong understanding of restructuring prior to requesting the placement. This may be hard to come by during your brief summer analyst stint, so you should read up on deals Lazard has done recently and be prepared for slightly more intensive restructuring interview questions to come your way at the end of the summer. They'll want to know that you know what you're getting yourself into before joining.
Lazard Interview Questions
Since this site is obviously dedicated to restructuring, let's go over some of the questions that have been asked to associates recruiting for restructuring (including at Lazard). These may pop up in a summer analyst interview, but you should expect primarily traditional M&A interview questions.
Let's say we have a bond with a YTM of 20%. Can you ask me some questions to figure out what the current price is?
This is a bit of a tricky question that is just the inverse of the traditional bond math questions we’ve gone over before (where you need to figure out the YTM).
If we’re trying to figure out how a bond is priced, we need three details: YTM (which we’ve been given), coupon rate, and years to maturity.
So, for this question you’d want to ask how many years until maturity and what the coupon rate is. For this example, you could be told it has an eight percent coupon rate and two years to maturity. That would mean a price of $80.
If we use the estimated yield to maturity formula to confirm it would be (8 + (20/2) / (180 / 2)) or 18 / 90 = 20%.
This a pretty open-ended question in which you could easily ramble on for ten or twenty minutes. It's important to remember in an interview to keep your answers to just two or three minutes and to try to always bring it back to what is relevant for the purposes of restructuring investment bankers.
For a more long-winded treatment of this answer, be sure to check out this post I made on the signs of corporate distress.
From a restructuring investment bankers perspective, the two major things that will be focused on are liquidity constraints and maturity walls.
As we've talked about in prior posts, if a company has debt coming due many years from now and they have sufficient liquidity - despite poor and declining earnings - then there's no reason for them to necessarily preemptively restructure. They have time and so can try to affect a turnaround in the business without having to deal with creditors.
For restructuring investment bankers to get involved - for either out-of-court or in-court work - there must be an impetus or catalyst. This is most commonly either the company having so little liquidity that they'll need to start missing cash interest payments soon or the company having debt coming due that they don't have the ability to just roll over.
These two elements are what I'd consider to be primary characteristics. These primary characteristics of distress inform the secondary characteristics such as debt trading down and debt being downgraded by rating agencies.
In other words, the debt will trade down and be downgraded as a result of the diminishing liquidity or maturity walls approaching that can't be rolled over.
This is one of those questions that will almost invariably pop up at some stage in the interview process.
As a general rule, it's a good idea to talk about a case that the bank your interviewing with has been involved with. However, unlike in M&A it's not strictly necessary since not every restructuring deal is well publicized.
Further, sometimes deals can be used as a way to discuss innovations in restructuring solutions. For example, I wrote a rather lengthy guide on Serta's restructuring - as part of the Restructuring Interviews course - that would be great to talk about in any interview. While Serta was advised by Evercore, the case demonstrates a relatively innovative kind of restructuring solution (a non-pro rata uptier) that restructuring bankers across the street will be pitching to some of their clients for years to come.
As another general rule, it's best to talk about out-of-court restructurings or pre-packs in interviews. Talking about traditional / freefall Chapter 11s can be a bit messier as there is always a lot of back and forth and little nuances that you can be quizzed on. Out-of-courts are generally more opaque - thus you can't be faulted for not knowing all the details - and pre-packs are more definitive since they're agreed upon prior to filing so there's no wrangling in court (everything you need to know for an interview will be laid out in the Restructuring Support Agreement).
When discussing a deal you should spend a minute or so talking about the company's background and how they got into distress. Then move toward talking about their pre-restructuring capital structure, then what their post-restructuring capital structure looks like. If possible (you may not always have access to all this information if it's a private company that restructured out-of-court, for example) talk about the total amount of debt reduction, total cash interest expense reduction, where maturities are now, and where debt is currently trading.
Whenever you're discussing a deal you always want to illustrate that you understand the entire point of the process is to put the company on a firmer footing for the future by having its capital structure right-sized or to buy the company more time to turn things around than they otherwise would have had.
Note: For reference, Lazard has been very strong in the retail space recently (which is a good space to be strong in these days!). They've had a number of large mandates including Forever 21 and J. Crew. They've also just been engaged by Belk.
Part of what makes restructuring such a fascinating field is the diversity of restructuring solutions that are possible (including how various solutions are combined to try to provide a more comprehensive solution to the debtor's struggles).
Three broad categories of out-of-court restructuring solutions can be thought of as involving debt-for-debt exchanges, debt-for-equity exchanges (equitizations), and/or amend and extends. As mentioned, more comprehensive solutions often involve a mix of these three broad categories that are contingent on what the capital structure of the debtor is and what the ultimate objective is (plus, of course, what creditors are likely to agree to!).
Over the past few years - as I wrote about in the Restructuring Trends / Serta guide - there has been two forms of innovative out-of-court restructuring solutions that have caused quite a bit of controversy among secured lenders: IP transfers and non-pro rata uptiers.
In an interview, if you can just articulate the three broad categories of solutions mentioned above, then that is entirely sufficient. No one is expecting you to know too much about more specific kinds of restructuring solutions like IP transfers or how they work.
However, if you can speak a bit about IP transfers and non-pro rata upteirs - which I may get write about in a future post if I have time - then that's even better as it shows you're keeping up with the trends in the space and must have a relatively advanced understanding of what RX banking is all about.
Let's say OpCo has $200 in assets and $150 in debt. HoldCo has $100 in debt and an upstream guarantee from OpCo. What are the recovery values?
Guarantee questions can be tricky. They used to be asked every now and again a few years ago, but they seem to be hardly asked at all now.
I imagine this is partly because to properly ask a guarantee question you need to qualify so much (the exact nature of debt and the exact nature of the guarantee) that they can become a bit convoluted for interview purposes.
In general, when it comes to guarantee questions your interviewer most often is going to assume that the debt is all unsecured, that all the assets are held by OpCo, and that there's an upstream guarantee benefiting HoldCo.
You should begin by asking your interviewer if the debt is all unsecured. Assuming it is, then the $100 in debt at HoldCo would be pari with the $150 in debt at OpCo due to the guarantee. This $250 in debt is covered by $200 in assets leading to a recovery value of eighty cents on the dollar for both OpCo and HoldCo creditors.
If there were no guarantee, then the debt at OpCo - where the assets reside - would be made whole and $50 would be left over for HoldCo giving them a fifty cents on the dollar recovery (since HoldCo would hold the OpCo equity).
Lazard is without a doubt one of the top restructuring shops on the street. Even with significant senior exits over the past decade, they've retained their place as one of the top debtor-side restructuring investment banks.
Unfortunately, for undergrads the path to RX at Lazard is a bit more tricky. Not only do you have to get a summer analyst offer - in which your interview will be predominately focusing on M&A questions - you also have to be able to then land a seat with the RX team at the end of the summer.
Having a firm understanding of restructuring, knowing what kinds of solutions exist and recent deals, and knowing how to make little deliverables like screens and profiles will be essential to differentiating yourself and landing a seat.
As always, if you're looking for even more questions along with a nearly 100-page overview guide, actual deliverables, and case studies, be sure to check out Restructuring Interviews.
Best of luck in your prep!