Since the credit crisis began to bite last year, European leveraged finance has been among the most impacted markets. But while traditional bank businesses have struggled to adapt, the crisis has thrown up new opportunities for those leveraged experts willing or able to change tack.
Two main exit routes have emerged for staff left without any dealflow: a syphoning-off of expertise by the buyside, especially by sponsors new to buying debt; and a beefing up of institutions’ own capacity to benefit from the expected rise in restructuring and distressed business.
Taking the first route is market stalwart Chris Baines, who has resigned after 19 years with Societe Generale. He is expected to take up a senior buyside debt role with a sponsor-backed entity in the next three months. Baines’ move echoes that of John Empson, who quit JPMorgan last April to join KKR to run its leveraged loan business in Europe.
A number of global and European sponsors have raised dedicated debt funds to target either debt associated with their own equity portfolio deals or more generally to buy what they perceive to be undervalued credit assets, providing new buyside opportunities for senior debt market experts.
Given the backgrounds of people like Baines and Empson – with expertise in originating, structuring and selling down debt – the trend suggests the possibility that sponsors will look to disintermediate the debt market by underwriting and structuring their own deals.
London-based Baines’ most recent role was as managing director of European leveraged capital markets at Societe Generale, a position he has held for the last two years. He took up the position after a six-year stint as head of European loan distribution at the same bank.
On the restructuring side, Morgan Stanley has announced its intentions by hiring Merrill Lynch’s Benjamin Babcock as managing director and head of restructuring for EMEA, tasked with building up a business from scratch for the bank.
In the newly created, London-based role, Babcock will report to Gavin MacDonald, managing director and global head of M&A, but will work in co-ordination with New York-based Blake O’Dowd, head of restructuring for North America.
At Merrill, Babcock was head of European restructuring for two years. Prior to that he worked for Lazard and was a partner at Ernst & Young.
BNP Paribas is another firm looking to capitalise on the coming downturn. The bank has created a new distressed finance group under global head Alain Dib. In an internal move, Dib transfers from his previous position as co-head of European high-yield capital markets.
He will report to Frederic Janbon, global head of fixed income and to Dominique Remy, global head of financing businesses. Reporting to Dib in the US is Monique Hill, previously in charge of the bank’s distressed trading/special situations team in the US.