The Royal Bank of Scotland Leveraged Finance Group

The Royal Bank of Scotland (RBS) Leveraged Finance Group is one of the leading providers of senior and mezzanine debt for European leveraged transactions. In 2000 RBS lent in excess of GBP4 billion ($6.4 billion) on over 200 leveraged transactions.

Although the German Leveraged Finance team was only established in early 1999, RBS is already one of the top players in the German LBO market, having underwritten almost DM3.5 billion over the last two years. Last year was a successful year for the German Leveraged

Finance team with 13 transactions completed across Germany, Austria, Switzerland and Scandinavia – eight of these as arranger or co-arranger. Recently the team acted as joint arranger on Messer Griesheim.

To address this strong growth in activity, RBS Leveraged Finance now has a team of 16 professionals operating from the Frankfurt office.

“The success of RBS Leveraged Finance lies in its ability to offer customers a genuine one-stop debt solution package,” says Michael Foecking, head of Leveraged Finance Germany. “This is facilitated by a streamlined decision process and based on short internal lines of communication, both designed to underpin our unrivalled record for deliverability.”

Enlarged leveraged finance capacityRBS Leveraged Finance has benefited from the increased capacity following the Royal Bank’s acquisition of the NatWest Group. Today, thanks to its strong balance sheet, RBS has an underwriting ability that is matched by only a few European banks.

A complete product range complements this increase in scale. RBS has a significant position in securitisation, private placements and eurobonds and has an emerging high yield capability.

Recognising the importance of specialised distribution, RBS Leveraged Finance has established a dedicated syndication team of eight professionals that gives RBS

the confidence and ability to offer its customers market leading financing packages.

Cross border deal teams RBS remains committed to establishing the Leveraged Finance business across Europe. With about 120 deal professionals operating out of leveraged finance offices in London, Paris, Frankfurt, Milan, New York, (and a Madrid office to open shortly) RBS is well positioned to assemble international deal teams for cross-border transactions.

Major mezzanine lender RBS arranges classic mezzanine debt and also high yield bond bridges and PIK notes either alongside senior debt or independently. RBS has also started investing its third fund, a GBP600 million (E1 billion) fund provided by the bank. The

new fund allows RBS Mezzanine to take mezzanine positions up to GBP30 million and to arrange and underwrite tranches in excess of this for the larger deals.

Over the last 12 months RBS Leveraged Finance Germany has completed five transactions as arranger or co-arranger of various types of subordinated debt. Recently, RBS

has formed a German Mezzanine Solutions team which, in addition to existing mezzanine capabilities, will focus on providing mezzanine in transactions that fall outside the mainstream private equity arena.

Keen to lead large transactions

“Thanks to an increased underwriting capacity, a complete product range including high yield bond capability and a dedicated syndications team, RBS Leveraged Finance in Frankfurt is now keen to lead large transactions,” states Michael Foecking.

The Royal Bank’s capacity to arrange and underwrite large transactions was recently demonstrated in the acquisition of Messer Griesheim by Allianz Capital, Goldman Sachs and the Messer Family. The RBS Frankfurt team acted as joint lead arranger on the senior

and bridge loan and also acted as co-lead manager of the high yield bond.

Mid market remains a core focus

Although the capability now exists to lead the largest transactions, RBS Leveraged Finance does not intend to neglect a core part of its business the mid market. “The mid market remains a core business which we remain fully committed to,” states Michael Foecking. “Our target in Germany is to arrange or participate in senior debt over DM80 million and mezzanine over DM15 million.”

Providing support through to exitEarly in 2001 Leveraged Finance Germany also implemented a four member team for portfolio origination and management. In case of add-on-acquisition, re-leverages, secondary buyouts and other new business opportunities arising from the portfolio the team ensures quick response to borrowers’ requests post closing.