Salomon Smith Barney has formed a new collateralized debt obligation group called Global Portfolio Solutions by merging the cash flow and synthetic businesses at a global level. New York-based Janice Warne and Sumit Roy have been named global co-heads of the new group. They both keep their former assignments in addition to co-heading the new group. Warne continues to head global structured bonds, which is comprised of private placement, leasing securitization, project finance and enhanced equipment trust certificates. Roy keeps his global head of credit derivative hat as well. Rick Caplan, Nestor Dominguez and Doug Warren will co-head the U.S. part of the new CDO group out of New York while Tim Beaulac and Alan Shaffran will co-head the European component from London. All five report to Warne and Roy. They either did not return calls or declined to comment. Dan Noonan, a firm spokesman, declined to comment.
According to an internal memo obtained by BondWeek, the group is being formed in response to the growing convergence of cash and credit derivative products in the origination of CDO transactions. The combined businesses will offer collateral managers a single shop and a coherent pitch on the sell-side, as managers routinely alternate between cash and derivatives forms of collateral for the management of their deals.
The trend is not new in the CDO market. Top players such as J.P. Morgan Securities, Lehman Brothers or Bear Stearns (BW, 3/25) have already integrated their businesses into one unit, as well as smaller firms such as Royal Bank of Canada or ABN Amro, says a banker in London. A top official at SSB declined to comment on the timeliness of the integration but says that not all firms have merged units, citing Credit Suisse First Boston, ranked number one in the CDO league tables, as an example.
On the cash flow side, Beaulac will continue to co-head cash-flow efforts with Dominguez, but will do so out of London. A banker at SSB says the relocation allows Beaulac to replace de facto former head of European cash flow origination, Seth Vance, who left for Deutsche Bank two months ago. Another reason, he adds, is because the CDO market is growing faster in Europe than in the U.S; which creates a need for experienced CDO transactors there. He points to the fact that there are approximately 24 New York-based CDO bankers within the new group versus only 12 in London, making the need to relocate talent to Europe even more pressing. Both teams are evenly split between cash flow and derivatives. --Emma Trincal