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Merrill Lynch Wades Back Into High Yield

Merrill Lynch is moving back into the high-yield world in both the U.S. and Europe after not having a major presence in the market for several years, and recent hires at the senior management level in New York and London underscore the firm's renewed commitment.

Merrill Lynch is moving back into the high-yield world in both the U.S. and Europe after not having a major presence in the market for several years, and recent hires at the senior management level in New York and London underscore the firm's renewed commitment. Todd Kaplan, global head of leveraged finance, said Merrill's goal is to be among the top five dealers in the leveraged finance league tables by the end of next year; the firm currently ranks 10th globally in fees from high-yield offerings this year, according to Dealogic.

Recent new hires include Carl Mayer, managing director in high-yield capital markets at Deutsche Bank in New York, to head up Merrill's U.S. high-yield capital markets team. And Gareth Noonan, previously a director in leveraged finance at Deutsche Bank in London and New York for five years, has been taken on to flesh-out the high-yield capital markets team in London. Mayer, who could not be reached, starts later this month and will report to Greg Margolies, head of U.S. leveraged finance at Merrill Lynch in New York. Noonan, who was with Deutsche Bank during its ascent from 10th to first in the high-yield league tables, reports to Ian Gilday, head of European leveraged finance capital markets. Gilday, who is responsible for leveraged loans, mezzanine financing and high-yield bonds, confirmed that Noonan is Merrill's first hire in European high-yield capital markets in two years.

Kaplan said when Greg Fleming and Dow Kim took over as co-heads of Merrill's global markets and investment banking division last summer, they looked at the firm's presence across different markets and conducted a gap analysis that revealed the extent to which Merrill lagged competitors in high-yield. "The economic opportunity in high-yield jumped off the page," said Kaplan.

One high-yield veteran in London doubted that there is enough business in Europe to justify all the recent entrants and anticipates a shake-out, but quipped, "It wouldn't make sense for Merrill Lynch to let itself be edged out by players like BNP Paribas and Royal Bank of Scotland, who are also intent on getting a piece of the high-yield action."

Kaplan acknowledged that leveraged finance has become increasingly competitive in both the U.S. and Europe with a commensurate impact on the market share and margins that banks can achieve, but argued that the market is deep and broad enough to make an attractive return on investment. "Merrill Lynch has a very strong brand, and issuers and investors know that we can [make our mark] when we pursue a course of action," he said.

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