Securitization People and Markets

Analysts are recommending that investors protect themselves from possible ratings downgrades in the European telco sector by shifting into step-up coupon bonds. Rick Deutsch, head of European high-grade credit research at BNP Paribas in London, recommends that investors in France Telecom (Baa1/BBB+) and Deutsche Telekom (A3/A-) switch to step-up issues. Both companies are under ratings pressure and Deutsch says that even though 35 to 50 basis points spreads between step-up bonds and plain vanilla bonds are wide, the market tends to undervalue step-ups. Depending on investors' credit view, the step-ups offer value, he argues.

Investors and analysts are divided over whether bondholders ofTyco International should take profits after last week's dramatic tightening, or hold on for what they estimate could be between 30 and 60 basis points of additional value. Last Tuesday, the 6.375% notes of '11 tightened from 245 basis points to 130 basis points over Treasuries after the company announced plans to split into four separate companies and pay down $11 billion in debt.

WestAM, the asset management arm of the WestLB Group, will begin to employ credit derivatives in its €2.7 billion fixed-income portfolio, which is run out of its London office. Nigel Jenkins, head of global fixed-income and currency, says the firm will use credit derivatives as a hedging tool as part of its wider strategy to increase its allocation to spread products and reduce its exposure to government bonds. "This is the way the whole fixed-income [investment community] is going to generate excess returns," says Jenkins, noting that governments are issuing fewer bonds and the absolute yield on govvies is relatively modest.

Dresdner Kleinwort Wasserstein-Grantchester, long a key player in the high-yield secondary market, plans to hire several bankers to its origination team in a bid to become a major underwriter. After leading only one junk deal last year, it has brought two deals to market this year that have raised a combined $500 million, and it plans to bring two more in the next six weeks totaling an additional $475 million, according to Ashish Bhutani, ceo of DrKW North America.

Asset-backed bankers are cultivating Spanish private equity clients to generate leveraged buyout deals that will eventually yield whole business securitizations. Nomura Securities, known in the U.K. for doing private equity LBOs, Credit Suisse First Boston and the Royal Bank of Scotland are all looking to get these types of deals off the ground as a way to offer more acquisition financing options as well establish a foothold in Spain's fledgling ABS market. The first deals still may be a ways off, because while whole business securitizations are relatively common in the U.K., none have been done in Spain. "The legal structures [for whole business deals] in Spain haven't been tested yet. You need to get a client willing to pay for the process," says Oscar Sanz-Paris, an ABS banker at CSFB in London responsible for the Iberian Peninsula. "Originators are definitely interested," he adds.

BNP Paribas has hired Caitlin Kelly as v.p. asset-backed securities origination. Kelly, who joins from Banc One Capital Markets, reports to Sean Reddington, director and group head asset securitization in New York. At BNP Paribas, she will be in charge of all fronts of asset-backed origination, from conduits to term ABS, which include credit card or auto ABS transactions. Reddington says the position was created due to the expansion of the bank's securitization business. He declined to indicate whether he would be hiring more ABS bankers in the near future

CIBC World Markets has hired Mike Senft as a managing director in its corporate and leverage finance group. Senft, who joins from Merrill Lynch, reports to Bruce Spohler and Ed Levy, managing directors who both head the corporate leveraged finance group for the U.S. out of New York. Senft says he will be responsible for originating leveraged loans and high-yield bonds for middle market companies and financial sponsors. Middle markets companies are mid-size companies with less than $1.5 billion in equity and financial sponsors are the financial companies that sponsor leveraged-buyouts. The position is newly created, says Senft, who adds that CIBC hired him to specifically build up the bank's effort in the middle market segment of the leveraged finance market. CIBC will selectively add more bankers in this department, but Senft declined to specify how many.

ABN Amro and Société Générale have done away with their dedicated European high-yield desks. Spokespeople at both firms say the desks have been integrated into other areas of their fixed-income businesses and emphasized that their firms were not out of the high-yield business.

CIBC World Markets has hired Mickey Spillane as an executive director to work on its high-yield trading desk. He reports to Scott Fahey, managing director and head of high-yield and distressed bank loan sales and trading. Spillane will trade credits in a number of sectors, including media, technology, energy and chemicals.