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Calyon proves more than the sum of its parts

01 Mar 2006

When EuroWeek asked banks, borrowers and investors to vote for the bank with the most improved profile in the syndicated loan market in 2005, they chose Calyon. But as Nick Briggs discovers, the roots of this success go back to the first half of 2004, with the merger of Crédit Lyonnais and Crédit Agricole's investment banking businesses.

By the end of April 2004, the transfer of Crédit Lyonnais's corporate and investment banking business to Crédit Agricole Indosuez, including Eu140bn of assets and liabilities, was complete and a new investment bank was ready to do business — Calyon.

There were the inevitable casualties at the senior level. Marc-Antoine Autheman, a former head of Crédit Agricole's investment bank, Joël Jeuvell, former head of Lyonnais's capital markets division, and Alain Papiasse, previously head of investment banking at Lyonnais, departed in 2004. 

But, say insiders, from the point of view of loan syndications the merger was quick, painless and productive — the two banks complemented each other well.

Outside France, Crédit Lyonnais had a strong presence in central and eastern Europe and the Commonwealth of Independent States (CIS), while Crédit Agricole had a well established foothold in southeast Asia, the Middle East and pockets of western Europe, including Spain.

"In 2004 a lot of work was done integrating the bank, and in 2005 the force behind that merger was realised," says Carol Shymanski, head of global loan syndications at Calyon in London. "We were able to build up momentum because both banks had diverse coverage but without much overlap — the strength in different niches that we showed last year came from that diversity, and ultimately from the merger."

For example, the bank made inroads into the UK market in 2005, bookrunning a £298m leveraged deal for Cox Insurance, and arranging a profitable $640m three year corporate loan for International Power that paid an initial margin of 175bp over Libor.

Towards the end of July, Calyon and Royal Bank of Scotland arranged a £315m eight year project finance facility for Saltend Cogeneration Co, a venture between International Power and Mitsui.

The deal, the first in support of a UK merchant power transaction for five years, was around 50% oversubscribed.

Calyon broke into the Turkish loan market in 2005, playing a senior role in syndications for Akbank, Disbank and Is Bank. In September it won a sole mandate to arrange and underwrite a $2bn structured commodity finance package for Angolan oil and gas company Sonangol. The deal was signed in December for $3bn after raising an oversubscription.

Organisationally, as well as expanding its leveraged finance team from four to seven last year, Calyon separated the desk — headed by Michael Sheren — from its structured finance group to allow the team to specialise further and deepen its investor coverage, particularly with funds, Shymanski says. Recent hires include Samantha Stephenson and Elisabeth Storm de Grave.

The bank also added to its project finance syndication team, bringing in Toby Walker and Tess Jarmolkiewicz as directors, and hired Nicolas Lipovsky to add to its origination capacity in central and eastern Europe. Calyon's secondary loan trading desk also got up and running in 2005 under Michael Fought.

Strong in a strong market

The French bank also worked hard to increase its presence in its home market, which last year produced $263.2bn of loans, making it the second largest market in the world after the $1.5tr US sector, according to data from Dealogic.

The bank won a third repeat mandate from retailer Carrefour in June and helped to arrange two deals amounting to Eu12.4bn for industrial group Suez.

The first, signed in May, was a Eu4.5bn seven year revolver that paid an initial margin of 17bp over Euribor. The second was a Eu7.9bn split-tranche bridge backing Suez's Eu11.2bn acquisition of Belgian electricity and gas company Electrabel.

The one and two year loan paid a margin of just 15bp over Euribor, but offered arrangers the lure of valuable ancillary business. Calyon and Morgan Stanley advised Suez on the acquisition — along with Rothschild — and both were chosen as bookrunners and global co-ordinators to arrange a Eu2.4bn rights issue, completed in October.

"Banks spoke with their balance sheets in 2005, and in the investment grade market borrowers put pressure on their relationship banks to lend," says Lise Kessler, head of corporate distribution and investor coverage for Europe, the Middle East and Africa at Calyon in London.

"Last year we deepened our investor coverage and read the market on the deals that we arranged to price deals along the forward credit curve in terms of structure, price and syndication strategy. That's especially important in a market where a basis point or two can make the difference between winning and losing a mandate." 

01 Mar 2006