Structured finance

Structured finance is something of a catch-all term for bespoke financing techniques outside mainstream corporate (balance-sheet based) lending and financial market instruments. As such it’s a fairly broad term covering a range of instruments from debt through to ‘mezzanine’ finance or equity capital.

Often practitioners will specialise in a particular business sector, for instance oil and gas, power or telecommunications, or in a type of product such as leveraged finance for buy-outs. This product or market expertise enables structured financiers to tailor packages of debt and other products to the specific requirements of a transaction, asset or project.

The careers of structured financiers

Structured financiers will typically undertake a rigorous analysis of the risks involved in a transaction – in most cases reviewing the same factors as the deal’s sponsors. The lender’s job is to develop a balanced financial package involving bank and sponsor funding, which ensures that the different parties to the transaction are allocated the risks they are best able to accept and are rewarded in line with their contribution. This will involve thorough examination of all the issues which might affect a transaction’s outcome and a sophisticated economic modelling of its likely performance, to see how factors such as changing construction costs or commodity prices might damage a project’s ability to meet its obligations.

Industry knowledge is crucial and it is quite common for structured financiers to specialise in an area, such as oil and gas or power project finance, for a good part of their career.

How to get into structured finance as a graduate

Junior team members often come from graduate trainee programmes, having been talent-spotted during their first year or two as they make their way around the organisation. Some employers have recruitment schemes focused specifically on structured finance.

Structured finance teams are usually fairly small – perhaps 5 to 20 members – with ad hoc deal teams being formed under an experienced deal leader for a specific transaction. Individuals within a team may well specialise in a particular sub-sector. Thus, in an oil and gas team, one member may focus on the development of oil and gas fields while others concentrate on refineries, pipelines or petrochemical plants. A key part of the appeal of this area of finance is that you can become something of a recognised expert.

Skills required for structured finance jobs

Sector knowledge and financial structuring can be learned. Potential employers will look much more for the will to win and to innovate, coupled with:

• Analytical skills and a good eye for detail
• Verbal and written communication skills
• Entrepreneurial instincts.

With thanks to Steve Mills, head of oil and gas project finance with Royal Bank of Scotland, London, for his help with this article.