|Rick Van Zijl|
McGrath and Van Zijl, both Goldman Sachs alums, began interviewing with Barclays last summer but neither knew the other was also talking to the bank. Van Zijl came through a recruiting firm and McGrath came in through a few former Goldman employees that he knew. The two found out about each other along the way, which Van Zijl said just made the idea of moving even more appealing. They resigned on Oct. 28 and their first day at Barclays was Jan. 30.
The pair is responsible for co-running the leveraged finance and origination business, with McGrath also responsible for leading the firm's U.S. high-yield distribution efforts. Van Zijl is also responsible for leading the firm's U.S. leveraged loans and mezzanine finance efforts. Both joined Goldman Sachs in 1998. Before he left, McGrath was a managing director and head of credit syndicate; during his time at Goldman he had previously served as head of high-yield capital markets and head of U.S. high-yield sales. Van Zijl was a managing director in leveraged finance.
To build the platform, Van Zijl explained that he and McGrath decided that if the objective was to be a full service leveraged finance shop, they would need to have risk distribution resources in place first. They would also need to get the sponsors group, the loan desk and the high-yield desk running at the same time so the bank could offer clients a number of options.
They had a very detailed time line that broke down tasks, month by month. "We had a battle plan for the first 30 days, first 60 days, first 90 days," said Van Zijl. "I think our original intention was to have both of the desks up and running by the end of July/early September, since August is kind of a wash. That was the original intent but we are ahead of schedule." The bank loan desk was up and running the week of May 15th and the high-yield desk was expected to be functional in early July.
The big push was to get its trading functions up and running. It started trading loans in May and bonds in June. The firm hired Jason Moynihan from Lehman Brothers to head its U.S. par loan trading, and hired Christopher Yanney from Delaware Capital Management to be head of U.S. high-yield cash and credit default swaps trading. Yanney previously worked at Goldman Sachs. Drew Doscher is the head of U.S. distressed trading. He previously was a trader at UBS. Marc Berg of CIBC World Markets is a stressed trader. The firm may also add a loan-only CDS trader later in the year.
"When you are comfortable with the trading and distribution side of the business, then you let your origination resources go out and pitch business. You don't want to create risk without the ability to move it," Van Zijl said. The origination team is pitching now and Van Zijl anticipates leading its first deal in September or October.
The firm had planned to hire about 50 people this year, and currently the overall leveraged finance group has 65 members. Van Zijl estimated that he and McGrath have interviewed over 200 people during the past few months. The bulk of the firm's hires come from Goldman. A sampling of former Goldman alums include: Josef Norflus, a director in leveraged corporate origination; Mark Jenkins, a director in leveraged corporate origination responsible for the energy and power sectors; Jeffery Rowbottom, a director who will be head of the U.S. high-yield syndicate; David Scudellari, currently on garden leave; Peter Mackie, director in high-yield sales; Christopher Rulon-Miller, director in high-yield sales; and Jack Melnikoff, anticipated to be in loan sales. Ed Kearns joined from UBS, but previously worked at Goldman Sachs and John Kempf joined from Harbert Management Corp, but also used to work at Goldman. Kearns is a loan salesman and Kempf is a high-yield analyst for the U.S. lodging, leisure and gaming sectors.
Goldman is not the only bank that has been hit by Barclays' hiring sprees. Talent has been hired from Lehman Brothers, CIBC World Markets, UBS, JPMorgan, GE Capital, Citigroup and Bank of America. The weekly personnel announcements led one buysider to post this question on his Bloomberg tag: "Who has more money, the Yankees or Barclays?"
But just as money doesn't buy championships, success in the ultracompetitive leveraged finance market has never been easy. McGrath said Barclays is going to pick its spots. "We want to compete in niches where there may be less competition or niches where we think we have a competitive edge," he explained. He specifically singled out the commodities business and said the leveraged finance group could build on capabilities in that area and do financing in industries that have a cyclical nature, such as paper and forest products, as well as the energy and power businesses. "We think we can be competitive to the point where, [following] our three-to-five year plan, we'll gain meaningful share of the overall market," he said.
McGrath said that right now the high liquidity in the market offers a number of interesting opportunities on both the financing front and in terms of sales and trading.
Being so new to the market, he felt current conditions actually offer Barclays some unique opportunities. "We have a relatively clean balance sheet, which should enable us to do some interesting things in support of our clients in a downturn; [we could] build out...the distressed high-yield business," he explained.
Barclays hired several individuals from GE's restructuring group including: Ron Kubick, Douglas Kelly and Joseph Jordan, all whom now work in leveraged finance execution. "We've prepared ourselves for what we think will be the inevitable turn in the credit cycle. We don't know when it will be, but inevitably the cycle will turn."