Although debt was almost impossible to find in 2009, there was one firm that excelled its leverage allocation to private equity and that was JP Morgan.
Despite adverse market conditions, the bank managed to outperform its competitors in its ability to executive transactions and provide global leverage finance to private equity firms that have been so desperately in need of it. The firm has spent the year balancing the needs of issuers by developing financing strategies and using a top class distribution platform.
In a bid to steer clients through debt maturity challenges over the past year, JP Morgan introduced creative solutions such as “amend-and-extend”. It anticipated the need of the leveraged finance market as it evolved from the LBO-centric environment to one predominantly focused on corporate-to-corporate transactions.
The firm has been consistently ranked number one in leveraged loans and high yield bonds and remains the lead-left bookrunner of choice. The firm is streets ahead of its nearest competitor, Bank of America, in the leveraged finance market as the firm that has taken second place executed only 66% of JP Morgan’s volume.
Internationally, JP Morgan continues to lead the market in breadth and diversification of deals. In Europe it re-opened the loan market in the beginning of 2009 with arrangement of the €9.3bn RWE transaction. It was the market leader in debt buybacks in 2009 and innovated the “amend-and-extend” transaction for cross-border issuer UPC. The firm also re-opened the LBO market in October 2009 with the CVC acquisition of InBev’s Central European operations for €690m.
JP Morgan merged the expertise within debt origination, M&A with knowledge of the investor base within capital markets and loan sales, resulting in overwhelming success. Over nine mandates have been successful during 2009, which vary from pure covenant amendments to full restructuring.
The firm was the market leader in debt buybacks in 2009. It designed and developed a strategy to combine open market purchases with a Dutch auction to create a favourable environment for clients. The successful outcome achieved in Virgin Media, the first amend-and-extend, served as a catalyst for the successful transactions for UPC and Telenet.
The proposal to lenders was split into two requests, which included on the one side, covenant reset and permission to tap the high yield bond market (proceeds would be used to pay debt) and on the other, a deferral of the amortisation payments and maturities as lenders would roll into a new bullet longer tenured tranche. The deal was an overwhelming success.
At the end of 2008, the firm created an in-house restructuring business. The thesis was to marry the corporate finance expertise within debt origination and M&A with knowledge of the investor base within capital markets and loan sales. The venture proved to be a success as JP Morgan has worked on over 15 engagements in 2009, including successful amendments for CWT, Materis, Gallery, Carmeuse, Schaeffler and Kabel Deutscheland and ongoing mandates for Yell, Evraz and CMA/CGM.
In April and May of 2009, the UPC transaction embraced a loan extension, a bond exchange and a new money raise in the bond market. UPC has extended more than €3.5bn of its debt maturing in 2014 to 2016/2017 and issued over €500m of new high yield bonds.
In August 2009, JP Morgan executed Telenet’s voluntary term loan extension offer relating to the company’s €2.3bn senior credit facility. It had a weighted average maturity extension and margin uplift of 22 months and 95bp respectively. The transaction was a success. The company achieved rollover commitments exceeding 85% of total term loans offered for exchange, including more than 90% of the TLC.
In relation to secondaries, JP Morgan committed US$3.8bn to support trading and provide liquidity to the market.
In terms of debt buybacks the firm was invaluable for firms like Trader Media, Jupiter and Fraikin and for sponsor-driven debt purchases like Allianz Capital Partners’ programme to buy debt in Selecta and forgive it.
The firm designed and developed a strategy to combine open market purchases with a Dutch auction to create a favourable dynamic for clients. It also pioneered the standard market practice with respect to debt buybacks – transparent public processes whereby the borrowers agree to restrictions around the debt repurchased to effectively create a permanent reduction in debt.
New money was hard to come by in the European loan market and as a result very few deals were completed in the past year. But JP Morgan’s approach to raising new money sought to take advantage of corporate/sponsor relationships rather than supply/demand dynamics – RWE and CVC’s recent purchase of ABI’s Eastern European assets are good examples.
Headquarters: New York, US
Countries present: 60
Global leveraged finance market share: 12.4% as lead-left bookrunner, 9.8% as traditional bookrunner (ThomsonOne)
WHY THE FIRM WON:
• Re-opened the LBO market in Europe with the CVC acquisition of InBev’s Central European operations for €690m
• Created an in-house restructuring team
• Secured nine mandates during 2009
• Market leaders in debt buybacks
• Bank of Ireland
• BNP Paribas
• Credit Suisse
• Deutsche Bank
- JP Morgan