BoS to step up structured finance

Bank of Scotland and Halifax have announced they are to merge in a deal worth circa GBP29 billion. Both parties retain their separate brands – Halifax, Bank of Scotland, Clerical Medical and so forth – and they will be housed under a holding company called HBOS, which will be headquartered in Edinburgh, Scotland.

As its balance sheet has strengthened post merger, the Bank of Scotland has said that it aims to increase its underwriting of acquisition finance and expand its structured finance operation. Both of these functions are housed under the corporate banking division, which will be headquartered in Edinburgh, Scotland and is headed by George Mitchell. (The retail banking operation will be headquartered out of Halifax’s old headquarters in Halifax in Yorkshire, England.)

Mitchell has five divisions within corporate banking: Structured Finance, which is run by managing director Mike Wooderson; Integrated Finance, which is run by managing director Peter Cummings; Relationship Banking Scotland, which is run by managing director Bob Munroe; Relationship Banking England, which is run by managing director Ian Robertson; and Relationship Banking Europe and Asia, which is run by managing director Jim Malcolm.

Structured Finance includes senior debt and mezzanine finance lending as well as a fund-of-funds business that is run by Graeme Sturrock. Sturrock’s responsibilities have grown considerably in the last two years with the fund-of-funds business currently investing in circa GBP600 million in some 68 funds. In 2000 Bank of Scotland was lead debt arranger on UK buyouts by number having financed 64 deals worth GBP3.4 billion, when taking the whole of Europe into account those figures climbed to 74 deals worth GBP3.7 billion (this figure includes UK deals.)

And for mezzanine funding Bank of Scotland led the field by number in arranger on UK buyouts in 2000 with 22 deals worth GBP536 million and on European transactions (again these figures include UK deals), Bank of Scotland led by both deal numbers and combined values. It recorded 24 deals worth GBP575 million.

Integrated Finance is a one year old one stop shop initiative that brings together joint venture structuring, debt and equity financing and project financing. Last month the team concluded a deal that saw Bank of Scotland form a 50:50 joint venture with Macdonald Hotels plc to acquire 86 Heritage hotels.

The deal, for GBP235 million, involved GBP200 million in cash payable on completion and GBP35 million in cash deferred for 18 months following completion. Macdonald Hotels made a GBP31.25 million investment for 50 per cent of the equity and the loan stock of the joint venture.

This was funded by increases in its existing bank facilities and Macdonald Hotels also granted Bank of Scotland an option over 3,005,137 new shares in Macdonald Hotels with an exercise price of 167 pence per share. For Bank of Scotland’s part it made a GBP31.25 million investment for 50 per cent of the equity and loan stock of the joint venture and provides senior funding lines of GBP210 million. The three relationship banking divisions largely cater for post deal issues. Jim Malcolm, who heads the Europe and Asia team, has built and increased operations in Amsterdam, Frankfurt and Paris.