You can convert type into shapes by creating outlines.

Open a new document in Illustrator. Type your initials

Type > Create Outlines (all letters will be groupped together)

Object > Ungroup (to select each letter separately)

Now you can use Direct selection tool:

to select individual anchor points and edit them:

Use Selection tool and overlap the two letters:

Select them both:

In Pathfinder palette - click Exclude

Done!