Fergus Kiely Head of FRNs (syndicate) and Euro-MTNs HSBC Fergus Kiely could nearly qualify as a Euro-MTN veteran at this stage as he has clocked up seven year's experience in the market and transformed HSBC's Euro-MTN desk in the process. And since the beginning of this year, he has taken on responsibility for FRNs (syndicate) too. Kiely joined HSBC in March 1997 when he moved from its British rival Greenwich NatWest (NatWest). At NatWest he spent three years working in MTNs for Ken Baugh who now works for Banc One on the issuing side. Kiely originally joined NatWest in 1989 when he worked as an asset manager in its start-up operation, leasing and asset finance before moving into capital markets. In less than a year of joining HSBC's MTN desk, his boss, Keith Phair, resigned and Kiely became head of the desk as well as sole member of HSBC's Euro-MTN team. He has since built up a team of five dedicated MTN staff along with other indirect reporting lines from sales people in Asia and Europe. Kiely says: "The biggest challenge has been building the band. The key to a successful desk is the staff and it's vital to get the right mix of people. It was a big change to go from doing it all myself to expanding the business and working as a team." New additions to Kiely's team include a Japanese hire who will join the London desk shortly and liaise with the 10 dedicated MTN sales people HSBC has in its Tokyo office. Another new hire will join in Germany and one more in London. Kiely will also take on a new hire based in HSBC/Credit Commercial de France's Paris office, following the merger of the two houses last April. The international expansion in the team reflects Kiely's strategy for HSBC's Euro-MTN business. As desk head over the last three years, Kiely has pushed to build the international Euro-MTN distribution capabilities of HSBC. In 2000, HSBC ranked joint seventh in the league table of programme arrangers, according to MTNWare. The table rankings are based on number of debt programmes - excluding financial repackaged facilities - signed between January 1 and December 31, 2000, grouping banks and their subsidiaries together. Although not top of the list, Kiely argues that HSBC's distribution capabilities are global and growing, allowing the bank to compete globally with top tier Euro-MTN houses. "In theory any house can act as an arranger on a programme as this is a legal process. What it's really about is distribution. Often issuers are disappointed with dealers or arrangers they appoint in servicing them going forward. In the past we have not actively gone for programme arrangerships but have instead concentrated on the distribution side of the business. Now we are competent in placement we will focus on winning mandates from our customers to arrange their programmes," says Kiely. Kiely's goals for the year ahead centre on developing a well-cemented team and building HSBC's Euro-MTN distribution capabilities. But he insists he wants to retain the human touch that a one-man Euro-MTN business can cultivate and which is not always present in larger operations. "We believe in e-commerce and the importance of technology. But we also place a high importance on the personal touch. Issuers and investors value the human touch and we will continue to provide that interaction." Nabil Aboulzelof Director and head of structured products Barclays Capital As one of the smaller houses in the Euro-MTN market, Barclays Capital has a niche European market, particularly strong in its domestic UK client base, and competes in a focused approach against the bigger powerhouses. Nabil Aboulzelof has been head of the MTN desk in London since August 2000 and has already doubled the size of the desk and aims to make his mark in 2001. The biggest challenge for Aboulzelof since taking up his position at Barclays has been the spread widening that's taken place in public and private markets, especially in the telecom and auto sectors. This has made it more difficult to grab the attention of investors and sales people with ideas to place different credits or structures. This stems from the oversupply of paper in the markets. Aboulzelof says January this year saw a supply of euro84 billion ($78.57 billion), smashing the previous record of euro53 billion in June last year. It leaves investors spoilt for spreads and creates tougher markets for dealers with a variety of credits to satisfy. But Aboulzelof says this is part and parcel of the mature Euro-MTN market as it is now. One of his goals for the desk in 2001 is to boost the volume of trades done off the desk as well as balance the structured deals. "You've got to make sure you're maintaining volume on the desk. It's important not to lose sight of that because then you see where demand is going. The more vanilla you place the more you find out about demand," he says. Aboulzelof comes from a background in structures. He started his city career when he completed his degrees in mechanical engineering with business and finance at University College London and London School of Economics. He then did a four-and-a-half year stint at SG in London, where he worked in the structured products group and sales divisions, before moving to ABN Amro (ABN). He spent two years in ABN's London and Amsterdam offices doing structures and Euro-MTNs. When asked what he sees as the ingredients to a successful Euro-MTN desk, Aboulzelof is careful to look beyond his background in structures. He says: "A successful desk manages both volume and relationships. You have to make money. You can't just focus on individual structured deals. It's a marriage between volume and profitability." Aboulzelof has three others in his Euro-MTN team. He markets the Euro-MTN product as a funding platform that can satisfy all of an issuer's funding requirements. And he believes there is a growing acceptance among issuers of the importance of the Euro-MTN programme as a funding solution. He sees a closer correlation between banks that do Euro-MTN deals for issuers and banks that win bigger mandates on the back of it. "Issuers are more aware of which dealers are doing private deals for them. And it's those dealers that issuers tend to invite to pitch for public deals. MTN deals open a door into public issues," he says. That said, the focus for Barclays' Euro-MTN desk under Aboulzelof will remain firmly on strategic European clients with whom the bank has existing business relationships. Aboulzelof is keen not to spread the Euro-MTN desk too thin so as to maintain a high level of personal service with core clients. He believes the Euro-MTN market is a series of pockets of demand from specific investors and therefore has enough niches to allow big powerhouses and smaller more focused houses to compete. He says Barclays cultivates its niche business by being able to tap into these pockets of demand and respond quickly to investors. With this in mind, Aboulzelof does not see the various mergers and subsequent emergence of large MTN houses as a threat. "Big powerhouses bring benefit to smaller houses. When two merge they don't necessarily get twice the coverage. Other banks can pick up some of the business," he says. Frank Toulouze Director, primary and structured finance Mizuho Financial Group Frank Toulouze works on Mizuho's primary and structured finance desk. He joined the bank last April, when it was still known as Industrial Bank of Japan (IBJ). Five months later, on September 29 2000, IBJ completed its merger with Fuji Bank and Dai-Ichi Kangyo Bank to form Mizuho Financial Group, the biggest bank in the world in terms of assets. It now has a balance sheet of $1.3 trillion. Toulouze says: "When I left Salomon for IBJ it was a clear understanding that the merger was on its way, so it wasn't a surprise for me." Before he joined IBJ Toulouze worked in debt capital markets at Salomon Smith Barney. He started working for the group in 1990, when he joined Citibank's fixed income sector in Paris as assets manager. After two years Toulouze moved to London, but stayed with Citibank until last year, when the world of structures lured him away from the debt capital markets team. Toulouze says: "I wanted to move to a much more structure-intensive business, such as IBJ's Japan-oriented MTN desk, compared with the vanilla business I was involved in at Citibank and SSB, so the move made sense." And structures remains his area of expertise. Mizuho's forte is definitely its structured business into Japan. And although the Euro-MTN market has been seeing fewer structured trades this year Mizuho is going strong. Toulouze says: "The structured business is still good, as far as Mizuho is concerned. We know who buys the structured paper in Japan, especially. The investors are generally liquid and we know them very well, so we think this kind of structured business will continue to be strong in future." This confidence is a sign of Mizuho's close working relationship with its investors in Japan. The bank's Tokyo operation has 124 sales staff who work with the investors, who are mainly small investment houses. But Mizuho has also been involved in large deals that show it has the capability of any of its American and European competitors. Toulouze says: "We've done some significant deals for corporates in the private market. For example, last year we were in a position to raise ¥145 billion ($1.5 billion at the time) for Unilever in 48 hours. Of course, most of our corporate deals are a lot smaller." He now oversees the Czech Republic, the Slovac Republic, France and Holland and his responsibilities cover corporate issuers, financial institutions and supranational issuers. Although the primary and structures finance desk covers various issuance in the international market, the bulk of its business is Euro-MTNs and the majority of these are in yen. But Japanese investors are known for their conservative attitude to credit and one challenging aspect of Toulouze's role is encouraging the investors to consider credits apart from triple-As. He says: "The Japanese market is not that open to credit corporates. Japanese investors are still very much credit-risk adverse and it takes time to educate them." Toulouze believes that this situation will not change overnight, but over the next few years the market may see more Japanese investors looking lower down the credit curve. He says: "Over the next few years I think that the credit awareness of Japanese investors will open more and more. There will be a gradual trend towards more enquiry for single-A and sometimes triple-B names, including corporates. At the moment most of the structured trades are with higher-grade issuers, but I think this will change slowly in the next few years. I also think there will be more samurai bond issues from international corporates - there is a huge pool of liquidity here."
September 14, 2001
