Abbey National Treasury Services (ANTS), part of one of Europe's largest banking groups and the U.K.'s sixth largest, is building a leveraged loan operation in the U.S. to be a buyer of credits in both the primary and secondary markets and possibly start up a collateralized debt obligation. The bank is looking to cash in on a negative credit cycle that is producing fairly conservative credits with attractive spreads. Hans Scholz senior v.p. acquisition finance, for ANTS based in Stamford, Conn., said John Sykes, a buyside pro, has been hired from PNC Business Credit. Clifford Wells has come aboard as a senior credit officer from Bank Austria Kreditanstalt this week. The plan is in the fall to hire a portfolio manager to round the team out.
Scholz said there is also a preliminary idea to look at a CDO structure. "This is tentative but would be a classic cash-flow CDO composed of leveraged loans." Sykes has been hired as a v.p. in acquisition finance responsible for identifying investment opportunities and portfolio management.
Currently, assets are being bought equally in the primary and secondary markets, and are being booked in the London ANTS-books, said Scholz. The focus is on active portfolio management not on leading credits, he explained, adding ANTS will only buy officially rated transactions with a minimum of a BB- credit profile with no rush to build the book. "There are no plans to buy distressed debt, this is not part of Abbey's strategy," he reiterated. Some investment-grade credits are also attractive, for instance BBBs that provide the spread, he said. Credits from individual industries will be analyzed, so for instance Scholz is hesitant on automotive supplies, but health care is attractive. ANTS is also interested in investing in opportunity funds, such as J.P. Morgan's LoneStar IV deal
ANTS is very active in Europe in both leveraged and investment-grade deals, said Scholz, who came over from BHF Capital last year. "But the U.S. is the largest market in the world, and to become an active player over here, you have to be close to the deals and companies. ANTS opened a broker/dealer office in September 2001, so we [the acquisition finance group] piggy-backed onto that," he added, explaining the timing of the move. In addition to the spreads and the current credit profile of new issuance the U.S. market offers the advantage of a much more liquid secondary market, Scholz said.
Debra Anderson, head of acquisition finance in London said, "I believe that you have to be close to the market in order to take advantage of opportunities and avoid some of the pitfalls."