Royal Bank of Canada is fortifying its leveraged lending and sponsor advisory teams as the Toronto-based bank seeks more buyouts work in the United States and Europe as well as Canada.
“It’s a long term effort to build out the business,” Jim Wolfe, head of RBC’s U.S. leveraged finance group, told Buyouts. “The sponsor business is a critical piece of the investment banking pie.”
RBC’s sponsor business dates to 2007, and because it was never a big player in the mortgage market, the bank had a clean balance sheet going into the financial crisis, Wolfe said. “RBC aggressively used its balance sheet to take advantage of the market.”
Along the way, the bank has expanded both its leveraged finance and sponsor coverage teams. Where it had 10 people in leveraged finance two years ago, that group has grown to 30 today, while the sponsor coverage effort in the investment banking arm has grown from two managing directors in 2009 to five today.
It hired former Citigroup banker Judith Fishlow Minter in July to be co-head of the leveraged finance group, according to the Streetwise blog of the Toronto Globe and Mail. Minter, who spent two decades at Citi, most recently the head of U.S. loan syndication, was most recently managing partner at North Sea Partners, a New York investment bank, Streetwise reported..
The bank has taken on big deals; it is joint bookrunner on the planned go-private of health care products company Kinetic Concepts Inc., which agreed in August to sell itself for $6.3 billion to
But RBC also reaches well into the mid-market, Wolfe said. For instance, it provided a $135 million bank loan in August as acquisition financing for
The bank is willing to do smaller deals to help sponsors create value even though a $25 million loan, by itself, is not necessarily attractive for RBC, which is Canada’s largest bank as measured by assets, said John Sorice, managing director in RBC’s financial sponsor group.
“We look at it as an investment in the relationship,” Sorice said. “We’re very focused on getting behind little companies that are going to become big companies.”
While many lenders pulled out of the leveraged lending business following the financial crisis, RBC is committed to the market for the long term, Wolfe said.
“What the sponsor community demands is consistency,” Wolfe said. “It is the most important factor in business—and repeat business.”