Credit Suisse First Boston has restructured its bank loan trading desk, bringing its distressed group onto the private side of its operations under two new heads. Phil DeSantis and Grant Pothast, both managing directors, will now co-head CSFB's distressed bank loan group. DeSantis was formerly a managing director and trader on the firm's high-yield desk. Pothast has been CSFB's head of loan sales. The duo both report to Don Pollard, managing director and global head of CSFB's syndicated loan group.
Until now, CSFB's distressed loan group was located on the public side of the firm's operations. Bringing the whole loan group under the private umbrella mimics the model already used by some of CSFB's biggest competitors in the loan business, including Goldman Sachs and J.P. Morgan. Desks are choosing to deal with the public versus private issue differently, noted one market player. He said there are compliance and turf issues that influence firms' decisions on the matter. Officials at CSFB and a spokesman declined to comment on the change. CSFB must have felt that it was the best decision for compliance reasons or competitive reasons, noted one of the firm's competitors. "It's a good way to do the business," he said.
By focusing on the loan asset class, a desk can achieve synergies by putting their par and distressed teams together. The main advantage of the all-private approach is access to the bank-level information and the ability to assist clients with that information, noted one trader. One buysider, who remains at all times on the private side, said he appreciates private-side distressed desks because he can delve a bit more into the credit with the desk without feeling on guard. But, "In general, the sell-side desks are very diligent about maintaining their walls," he noted. The main drawback is that the distressed loan desk is walled-off from the high-yield desk or located on a different floor. The loan desk has to be much more proactive about communicating with its bond desk to determine where levels are, noted one trader.
The private/public model focuses on the strategies of the cross-over investor, helping them to execute hedging and relative-value plays, all from a public perspective. Under this model, the distressed loan desk is located alongside a firm's high-yield group. "It's a part of our bond business," noted one distressed loan trader, explaining how many of the accounts that his firm deals with are public. Bank of America, Deutsche Bank, and Salomon Smith Barney are believed to operate under this model.