Emerging market lenders were left feeling a little sheepish last week when Polkomtel, the Polish telecoms company, used a brokerage, rather than a bank, to coordinate its new loan refinancing.
The coordinator, Trigon Brokerage, was a pure adviser and did not lend in the deal. Bankers said this was a first — and, perhaps to the chagrin of some of them, Trigon did rather well in getting the terms the borrower wanted.
Lenders rushed to point out the problems with this technique, but there is no reason that, given the right circumstances, Polkomtel’s example could not be repeated.
From the beginning, Polkomtel made clear its objective with the Z7.95bn ($2.4bn) refinancing: it wanted to pay less for its senior debt.
This was made abundantly obvious when the borrower sent out a second request for proposals with drastically reduced margins, not long after issuing the first. Polkomtel wanted cheaper funds, and by coming to the market more than three years before it needed to refinance, it has time on its side. If it takes a while to get banks to come into the deal, Polkomtel will not be sweating.
In that respect, the deal was a roaring success. Polkomtel paid just 285bp all-in on the largest tranche, the Z2.65bn term loan ‘A’. The deal being refinanced had pre-fee margins of 375b-450bp, depending on the tranche.
Trigon says its independent status means it is able to fight for the borrower without any possible conflict of interest, whereas banks are trying to find a balance between making the borrower happy and hitting their own budgets.
It is hard for bankers to argue against this point. Where bankers are on more stable ground is in the execution. A co-ordinating bank will be fully aware of how much of its balance sheet it can offer a borrower. If a deal has a deadline — say if Polkomtel had come to the market with months rather than years to spare — then cutting down on the time it takes to communicate between borrower and lender might be imperative.
An independent financial adviser acting as co-ordinator in such a case might be an awkward middle man that could slow the process down.
But advisers and banks are growing closer in their knowledge. Senior bankers have moved to try out the independent advisory lifestyle after years in the loan market.
Take Francesco Carobbi. Last March, he left his role as head of loan syndications for Europe, Middle East and Africa at Bank of Tokyo-Mitsubishi UFJ after 30 years on the job to join an advisory firm.
It’s doubtful that BTMU — or the slow moving loan market — has changed so much in the past year that Carobbi can’t make a well-educated guess as to how the bank will perceive a borrower. Other bankers, including WestLB’s former head of loan syndications for EMEA, Stuart Frohmaier, have made similar moves.
Polkomtel and Trigon have undoubtedly taken a pioneering step. But now that it has been done, and done well, it is tough to see how loans bankers will not feel a pang of nervousness that it could be done again.
As long as the deal is not too complex — an independent adviser would probably lack the manpower or ability to syndicate a new money deal — then there is no reason that independent advisers won’t become a much more prominent part of the syndicated loans landscape.