GE Corporate Financial Services' global sponsor finance division has entered into strategic relationships with both Morgan Stanley and Lehman Brothers in order to provide one-stop financing solutions. Stuart Aronson, managing director and head of GE global sponsor finance, said the partnership links GE's balance sheet and coverage force with the high-yield underwriting expertise and large-cap universe of the two investment banks. Michael Hart, head of the global loan products group at Morgan Stanley, said "Morgan Stanley enjoys an excellent working relationship with GE and we look forward to strengthening that relationship in this important area of financial sponsors." Robert Redmond, Lehman's head of leveraged finance, and a Lehman spokeswoman did not return calls by press time.
Aronson explained that the premise behind the partnerships would primarily be to provide senior secured plus high-yield solutions to the buyout firms it serves. GE does not conduct high-yield business. For example, if there was an underwriting of senior debt and high-yield for a buyout, Morgan Stanley or Lehman would do the high-yield and GE would co-arrange the senior debt, Aronson explained, adding that there are several other combinations of products that the partnered firms could share. He said there are already three prospective, partnered-up transactions that GE and the other two firms are working on right now. He declined to specify details on these deals.
GE's interests in the sponsor business are different than those of investment banks, Aronson said. "It's beautiful because it is a symbiotic relationship," he stated. "Our relationships [with clients] are driven by the investment and interest in the borrower. We want the relationship asset because over time, we want to continue to sell more GE products, expertise and relationships," he added. He cited a case when GE linked a company's business to GE Appliances, resulting in further business and savings on both sides. GE is focused on getting the administrative agent role, but not as focused on fees, he noted. "With most of [our services] we don't compete with Wall Street," he said.
Aronson said the two investment banks benefit for several reasons. First, GE has 250 people dealing with and actively covering over 400 sponsors. "We bring a lot of feet on the Street," he said, explaining that GE brings to the investment banks a lot of firms that only need a high-yield product every two years or so. "So it is more economic for them to call on us," he said. Second, GE uses its balance sheet and takes significant or large hold positions. He cited the Kmart exit deal, where GE held $500 million (LMW, 4/28). Third, he cited industry and operating expertise from within the GE family.
GE is not bound to always team up with either of the two firms and Morgan Stanley and Lehman are not obligated to do so either, Aronson said. "Where it is appropriate, we will offer one-stop solutions with either GE/Morgan Stanley or GE/Lehman," he said. No partnered transactions had yet been announced by last Friday, but Aronson said GE's sponsor group was looking at 20 of its own deals in the pipeline that are north of $100 million. The partnership was formed over the past few months. Aronson took the helm of the newly formed global sponsor finance division last March.