Approaches to leveraged finance

  • 05 Aug 2005
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Syndicated loans teams are increasingly deriving the bulk of their revenues from private equity driven or corporate leveraged loans. This has persuaded many banks to examine how they structure these groups — from sponsor coverage to capital markets activity to distribution teams. Taron Wade examines what approach banks are taking and how they are capitalising on investor demand.

Barclays Capital
The leveraged finance team at Barclays Capital is split into six parts: the sponsor origination group; the mezzanine finance team; leveraged loans; high yield origination and execution; corporate leveraged finance; and transaction management.

All the groups are integrated, while within the syndicated loans group there is a specific leveraged finance syndicate and sales team made up of four people. There is also a separate high yield capital markets team and high yield sales, trading and research team. 

BNP Paribas
At BNP Paribas the global leveraged origination team is split between media and telecom and non-industry specific leveraged finance. The leveraged loan syndications team supports both of these parts of origination.  

When it comes to distributing the deals, the investment grade sales group is kept separate from leveraged loan sales.

The bank recently merged its secondary and primary sales teams in order to focus more on investor demand, but primary sales people still only sell primary deals to investors.

"We prefer primary sales to focus on placing new deals; this enables our secondary sales team to deliver a constant flow to investors not interrupted by the pressure of a primary deal," says Charlotte Conlan, head of European leveraged loan origination and structuring and deputy head of loan syndications and trading. 

The leveraged loan origination group is separate from the global loans group, but leveraged finance syndicate and distribution stand within the syndications team, separate from the investment grade business. There are seven people who focus on leveraged deals, as well as structured telecom.

But as the bank's leveraged finance business has started to take on a higher profile, it has begun to outgrow this model as originators are increasingly pitching for bookrunner roles and do not have as much time to cover investors.

"We're thinking of dividing the team into syndicate and sales," says Carol Shymanski, global head of loans. 

Deutsche Bank
For coverage, Deutsche Bank has a financial sponsor group and a leveraged corporate coverage team, which are situated within the leveraged finance group. The leveraged finance group structures and executes transactions and is closely linked to both the bond and loan capital markets teams.

In turn, the capital markets group, in performing its syndication role, is linked with sales and trading personnel who sell and trade high yield bonds, mezzanine and loans. Loan sales is split between leveraged and investment grade deals.  

Dresdner Kleinwort Wasserstein
In the first quarter, Dresdner Kleinwort Wasserstein (DrKW) created a joint venture between its financial sponsors investment banking group and its capital markets leveraged finance business.

The bank hired Brian McBride from UBS to co-head the new group, alongside Pascal Maeter, who runs sponsor coverage. McBride heads leveraged finance on the capital markets side of the business. His group sits between the financial sponsor coverage team and the syndicate group.

The distribution team includes both primary and secondary sales, as well as secondary market trading. There are sales people who focus on leveraged deals and those that focus on corporate deals.  

JP Morgan
JP Morgan has a syndicate team on the leveraged side that reports to its origination team, an unusual structure for a bank. To ensure that the syndicate is not compromised, however, the loan capital markets team signs off on any underwritings.

The distribution team is split between primary and secondary, but there are no specific sales people who cover leveraged loans.  

Lehman Brothers
At Lehman, the sponsor coverage group works with private equity houses on a multi-product basis — from debt to M&A to equities. Executing the transactions is left to the leveraged finance product group.

Both groups are part of investment banking, whereas leveraged capital markets and sales are part of the bank's fixed income division.

Sales people speak to clients everyday to keep a close watch on what investors want to be shown.

Royal Bank of Scotland
Royal Bank of Scotland has an intergrated sales teams, while at the same time keeping sales separated from the capital markets group.

There are specialists within the sales team, however, that focus on leveraged deals, as well as on geographic regions. Deals are originated through the sponsor coverage team, before the leveraged loan capital markets group helps with origination and structuring, and finally the transaction is passed onto the sales team. 

Financial sponsors coverage is a joint venture between leveraged finance and M&A. After a transaction is originated through the joint venture, the leveraged finance origination team is responsible for executing the deal.

The leveraged finance team is split regionally to cover western European countries. The leveraged syndicate team, made up of seven people, underwrites the transaction and there are three sales people within the larger sales team that work specifically on leveraged deals.

For now, the sales people focus predominantly on primary selling, but in the future SG CIB is likely to move towards an integrated sales model across primary and secondary markets.   

  • 05 Aug 2005

All International Bonds

Rank Lead Manager Amount $m No of issues Share %
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1 Citi 31,385.40 114 7.52%
2 JPMorgan 29,232.19 105 7.00%
3 Goldman Sachs 27,645.83 55 6.62%
4 Barclays 26,090.00 67 6.25%
5 Deutsche Bank 23,883.15 74 5.72%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $m No of issues Share %
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1 Mizuho 299.85 1 21.73%
1 ING 299.85 1 21.73%
1 Commerzbank Group 299.85 1 21.73%
1 BNP Paribas 299.85 1 21.73%
5 UBS 60.22 1 4.36%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $m No of issues Share %
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1 Goldman Sachs 1,607.28 5 22.59%
2 Credit Suisse 1,301.65 4 18.30%
3 UBS 970.80 3 13.65%
4 BNP Paribas 522.35 4 7.34%
5 SG Corporate & Investment Banking 444.17 3 6.24%