Loan House

Now that we are in an improved market climate, it may be difficult to remember just how turbulent conditions were at the end of 2011 and the beginning of 2012. Challenges went all the way to the top, as even SSA issuers could no longer count on the rapturous welcome to which they were accustomed. Uncertainty was the order of the day. “It was an extremely challenging backdrop – the close of 2011 and the start of 2012 were fraught with political uncertainty and currency volatility,” said Miles Millard, Deutsche Bank’s head of capital markets and treasury solutions. “There were many challenges, so you had to be able to demonstrate a truly global platform and commitment.” Deutsche Bank did just that, keeping a steady hand through difficult times. The bank helped calm nerves and execute transactions in extremely difficult conditions – all over the world. In January, Deutsche successfully led euro deals for the EFSF, EU and EIB – the first of several for each borrower – and followed up on the sovereign side with transactions for Spain, Austria, Belgium and Finland. The bank was also active in the European agency arena, with noteworthy deals for KfW, BNG, NWB, Cades and EAA, while at the same time keeping an eye on other currencies for opportunities. “There were many challenges, so you had to be able to demonstrate a truly global platform and commitment” This was perhaps nowhere better demonstrated than in the US dollar market, where KfW’s 10-year opened the way for other European issuers, including KBN, KommuneKredit, Kommuninvest, Municipality Finance, FMO, OeKB, Cades and NRW Bank. Rare sovereign forays were also accommodated, such as the Netherlands’ inaugural Dutch State Bond sold via Dutch Direct Auction and Iceland’s return to the market. Meanwhile, more natural dollar borrowers such as Canada were also represented. And from the high-grade world in Asia, Deutsche acted as lead manager on the tight 30-year deal from Temasek, Singapore’s sovereign wealth fund. Numerous transactions for the Washington supras were complemented by others for the Asian Development Bank and the EBRD, while Deutsche put in an extremely strong showing in sterling, where it was not only once again a trusted partner for the UK DMO with three syndicated Gilt deals, but also acted for key UK issuers such as Network Rail and TfL. The bank also provided arbitrage and diversification opportunities in sterling for overseas clients. Company business Deutsche remained a front-runner in the corporate arena, too. Highlights included printing deals for Anheuser-Busch InBev in both euros and US dollars, for Siemens in euros and sterling, and a three-currency, three-tranche hybrid transaction for BG Energy. The bank arranged more than 20% of the bonds printed by US investment-grade corporates in EMEA currencies, and also secured itself substantial market share by ushering peripheral borrowers to the market amid the ongoing turmoil in the eurozone. In May, it printed a €2bn dual-tranche offering for Hutchinson Whampoa, which was the largest ever bond financing in euros by an Asian corporate, as well as the first from the region since 2010. In July, America Movil became the first Latin American corporate to issue in euros since 2011 with the assistance of Deutsche, which was also appointed as sole lead manager on a rare sterling deal. In September, the bank helped Petrobras price its inaugural bond in sterling as well as carry off the largest ever euro financing by a Latin American corporate. Other highlights included acting as bookrunner on deals for AT&T, DirecTV and BMW in the sterling market, while its abilities in the non-core currency markets were demonstrated when it helped price Norwegian krone deals for Linde and Nestle as well as Australian dollar deals for BMW and Deutsche Telekom. It also led transactions for GECC in Australian dollars, Swedish krona and New Z

For Deutsche Bank, 2012 has been a runaway success. While many of its rivals suffered another year of disappointing volumes, the German house increased its market share once again, as its build-out in the US was completed in style. The bank was a bookrunner on 10 of the top 20 equity and equity-linked deals globally in the IFR award year, ahead of its peers, with Goldman Sachs next best placed with eight. On only one of those transactions was Deutsche passive – the disastrous Facebook IPO. Region by region, the deal roster is a picture of consistency. In Europe, the bank led five of the top 10 deals, including high-risk rights issues for UniCredit (to raise €7.5bn) and Banco Popular Espanol (€2.5bn). In Asia-Pacific it was on five of the top 10 (six including the league table ineligible Bank of Communications follow-on), with three IPOs among them. In the Americas, roles on the IPOs of Facebook and Santander Mexico, as well as the smaller the of two Kinder Morgan follow-ons, helped the bank to claim spots on six of the top 10. But the transactions that defined Deutsche Bank’s year – and cemented its status as a US ECM house – were the three government selldowns in AIG. Deutsche was not involved in the first poorly executed sale in March, which showed just how hard it was to sell when the market expected sales and knew the government’s entry price. Brought on board for the next deal in May, however, Deutsche and co-active lead Goldman Sachs used some strategy to execute the US$5.8bn sale over a weekend – taking the short-and-cover tactic out of play. Deutsche was also hired for the following two AIG sales. The next deal in August – again for US$5.8bn – was launched during trading hours. The crescendo was the US$20.7bn sale in September, the largest common stock offering in US history. Deutsche was not just one of the four joint global co-ordinators leading a syndicate of 11 joint bookrunners – it also replaced Goldman Sachs as the sole stabilisation agent. In such a large syndicate, that cherished role is a clear indication of seniority. “When Anshu Jain joined Deutsche Bank in the mid-1990s, Goldman Sachs led the IPO of Deutsche Telekom in Germany,” said Mark Hantho, Deutsche’s global head of ECM. “In the year he became co-CEO, Deutsche led the biggest AIG follow-on.” Deutsche forged its US Treasury relationship by developing the idea of TARP warrant auctions. Since 2009, Deutsche has led 24 TARP warrant auctions that have recovered US$5.4bn of bailout capital for US taxpayers. The only non-US bank active in the AIG process, Deutsche demonstrated the ability to uncover pockets of demand globally – on AIG’s sales of AIA, as well – which was instrumental in facilitating the Treasury’s exit at a profit for taxpayers. The AIG process epitomised Deutsche’s ECM approach in 2012, as the bank looked to tap global pools of capital and used non-deal roadshows to get the message out to investors. “If you look at the sizeable transactions that need to get done, like AIG, it is irresponsible if you are not looking outside of the US for these differentiated pools of capital,” said Brad Miller, co-head of global syndicate. “Failure to do so will impact both the style of execution and ultimately the valuation.” Hantho highlighted that 23% of the US$20.7bn AIG sale was placed in Europe. All across America Overall, Deutsche ranked eighth in the US league tables, with 127 pricings for US$14.4bn and a 7.1% market share. But as always, the league tables do not tell the whole story. Deutsche moves into third behind Goldman Sachs and Morgan Stanley when results are recut based on active books. This method notably sees the US commercial banks fall away. While the AIG transaction brought the bank attention, Deutsche has been gradually building itself into a serious US ECM player in recent years. The team

To see the full digital edition of the IFR Review of the Year, please <a href="http://edition.pagesuite-professional.co.uk//launch.aspx?eid=24f9e7f4-9d79-4e69-a475-1a3b43fb8580" onclick="window.open(this.href);return false;" onkeypress="window.open(this.href);return false;">click here</a>. Barclays’ ABS co-head Cory Wishengrad will never forget the ominous Monday morning in February 2011. Having just flown back to New York from Colorado nursing a broken arm from a skiing accident, he received “the email” from his manager. It almost hurt more than his injury. Ten senior members of Barclays’ securitisation team – in addition to his ABS co-head covering consumer finance – had defected wholesale to Credit Suisse. Others left for RBC. “At the time, I wondered what would heal more quickly: my arm? Or the business?” Wishengrad recalls. It was a chaotic, challenging time. A US$35bn ongoing programme from the National Credit Union Administration was in limbo with US$9bn still to be issued, and other deals about to go live. But the answer to the question he had posed became clear just weeks later: the business. “By the time I was done with physical therapy for my arm, we already drew from our own internal resources and cherry-picked the very best talent from the Street to make the team whole again. “We didn’t miss a beat.” Amazingly, despite the upheaval of losing a co-head as well as many senior bankers, Barclays remained a major competitor. In the 2011 awards period ABS table it ranked fifth, according to Thomson Reuters data, but rose to claim the coveted top spot factoring in government-related mandates for NCUA. One year on, it sits comfortably in second place, excluding CDOs.More than recovery Throughout the turmoil, say those involved, the firm did not lose one mandate because of the defection; not one issuer pulled out and not one deal failed. Barclays moved quickly to fill vacancies, choosing from the deep bench of bankers in other areas of the company and recruiting from the competition too. Barclays did more than just recover. It moved Diane Rinnovatore from its own debt capital markets team to co-head the ABS group with Wishengrad, who oversees “non-traditional” ABS. And it beefed up its securitised products origination group, rehiring Martin Attea from Morgan Stanley to oversee consumer origination, as well as several other newcomers in key areas. “We replaced everybody; the treadmill never stopped,” said Tom Hamilton, the long-time head of securitised products trading at Barclays who left the role in October to become a senior adviser to the bank. “I think it’s testament to the bank – to the culture of the institution and the business. It takes co-ordination across groups. It’s all hands on deck. A lot of quick moves were made; a targeted approach. We empower people and include them in the process.” “It was a pretty amazing time,” Wishengrad said. “It really tests what you’re made of as individuals and as a franchise. But we didn’t have a single issuer pull out. The people who we performed for during that time have become big allies of ours.” Certainly, the performance in flow ABS stayed strong. Barclays is typically not the lender with the largest balance sheet, but clients routinely choose the bank to structure and lead their securitisations. In the US, Barclays structured and led an unprecedented 55% of Ford’s transactions by volume in the year to mid-November. It also structured and led five of the borrower’s last eight deals, and was a bookrunner on seven of Sallie Mae’s last nine deals. It was bookrunner on 41% of Ally’s issuance in 2012, and 48% of General Motors’ financial transactions.Movies, pizza, and billboards While its flow business boasts some impressive mandates, it is Barclays’ strength in the esoteric US ABS sector that truly distinguishes it from its rivals. Barclays excels in structural and product innovation and is the go-to bank for high profile transactions.

To see the full digital edition of the IFR Review of the Year, please <a onclick="window.open(this.href);return false;" onkeypress="window.open(this.href);return false;" href="http://edition.pagesuite-professional.co.uk//launch.aspx?eid=24f9e7f4-9d79-4e69-a475-1a3b43fb8580">click here</a>. Post-crisis attempts to restore public confidence in derivatives took a step backwards in a year most memorable for Libor fixing, energy market manipulation, swaps mis-selling and a now infamous US$100bn wrong-way credit derivatives bet. It was a tough environment in which to shine, and a year that many will be only too happy to forget. But amid the deluge of disasters, some banks made huge strides towards readying themselves for the new regulatory environment intended to eliminate some of the scandals that hit in 2012. Swiss banks were pushed to the front of the queue for reform with the unenviable task of being the first to be tested under the Basel III regime in January 2013 – up to five years ahead of other jurisdictions. For Credit Suisse, that could have meant the end of its ambitions as a global derivatives player given the huge capital costs associated with much of the traditional over-the-counter swaps business. Instead, the bank turned the rigorous capital requirements into a competitive advantage, proving what many of its rivals were not able to – that its business model really worked under a framework to which others must eventually adapt. “We were compelled by our regulators to move faster towards Basel III compliance, but we embraced it and took it a step further to be the first bank in a position where the business is viable in a Basel III world,” said Eraj Shirvani, the firm’s head of fixed income for EMEA. As a result of a multi-year overhaul that saw the bank slash risk weighted assets and clean up its balance sheet, Credit Suisse emerged as a counterparty of choice with a Tier 1 ratio of 18.5% at the end of the third quarter and one of the lowest CDS levels of its peer group at sub-150bp. A more streamlined player, the bank was well prepared to navigate the new regime and build market share in the core areas that it deems economical in a new landscape that is still to be finalised. “We’ve had to really assess which markets make sense in a Basel III world and also look at whether it works in a Volcker, Mifid and Dodd-Frank environment, both at a granular and firm level,” said Shirvani.Less is more The less is more approach flies in the face of the traditional financial supermarket model that has historically been the goal of ambitious derivatives players. But Credit Suisse bankers believe that the old model will be unworkable under the new framework. “We have no appetite to be in the top three across the whole market as the idea of world denomination in rates houses is going to change. We want to be top three to key clients in key products,” said Jon Kinol, global head of rates. “You have to look at the areas where you have an edge, where you have a competitive advantage, and that’s what you have to focus on.” Amid the cost-cutting, Credit Suisse generated SFr4.7bn (US$5bn) of fixed-income revenues in the first three quarters of 2012 – 27% up on 2011 levels, while equity revenues, at SFr3.6bn, were just 4% down against a market that saw volume decline around 20%. “Since 2008, we’ve been through a big transformation, but we’ve always stayed on top of innovation,” said Anthony Pesco, global equity derivatives product head. “Innovation is one of the key determinants of success in this environment, alongside efficiency, control and capital.” When it came to innovative solutions to manage risk weighted assets, Credit Suisse proved itself to be a thought-leader from the start. One of the hardest-hitting consequences of Basel III is the credit valuation adjustment charge and associated capital requirement. For Credit Suisse, that represents a major contributor to the 30% increase in RWA as

To see the full digital edition of the IFR Review of the Year, please <a href="http://edition.pagesuite-professional.co.uk//launch.aspx?eid=24f9e7f4-9d79-4e69-a475-1a3b43fb8580" onclick="window.open(this.href);return false;" onkeypress="window.open(this.href);return false;">click here</a>. The Blackstone restructuring group was founded by legendary restructuring adviser Arthur Newman in the early 1990s. At the time he and a select few were essentially inventing that modern restructuring practice and taking the lion’s share of the assignments. The world is different now with upstarts popping up every couple of years and peeling off plum assignments. Newman, who passed away in 2010, had already passed the leadership mantle to Tim Coleman who had been Newman’s right-hand man since the early days. The practice that exists today is also different. Blackstone has adroitly managed to expand its first-class debtor-side brand to cover a variety of creditor assignments that have rounded out the practice and ensured Blackstone a role in almost all of the most substantial restructurings. The shift began in 2007. “You’re not going to win every debtor-side assignment,” said Coleman. “If you limit your options, you are giving up a lot of business.” In 2012, Blackstone performed a variety of restructuring transactions that included some that went to court and some that did not, debtor and creditor mandates, international deals, and a mix of distressed industries. The firm advised on 63 closed or ongoing deals in 2012, including 50 mandates in the Americas, representing US$183bn in liabilities; 11 mandates in EMEA, representing more than US$355bn in liabilities (including Greece’s debt restructuring which boosted Blackstone’s league table into the stratosphere); and two mandates in Asia, representing over US$442m in liabilities.High-yield humming With the high-yield market still humming along, default rates have remained low and distress confined to pockets. Still, Blackstone has managed to build its brand and expand market share in the quiet period advising companies in large, highly complex restructuring transactions. The firm’s roster includes Houghton Mifflin Harcourt, Kerzner, LA Dodgers, Lehman Brothers, Mohegan Tribal Gaming Authority and TerreStar in the US, Deutsche Annington, Greece, Klockner Pentaplast and Viridian in Europe, plus Dana Gas in the Middle East and Covalent in Asia. Since 1991, the US team has been involved in more than 325 distressed situations involving more than US$1.1trn of liabilities. Since beginning its European practice in 2007, the team has been involved in more than 50 transactions involving more than US$500bn of liabilities. “Every restructuring we are in, is a negotiation,” said Coleman. “It’s pulling people together, finding strengths and weaknesses of various positions and arguments; doing the analytics and finding solutions.” The firm is advising 30 in-court deals and 33 out-of-court deals. Among its biggest out-of-court deals, Blackstone performed a global juggling act to keep developer and luxury hotel operator Kerzner International from collapse. Kerzner’s flagship brands include the Atlantis, The Palm in Dubai and the One&Only luxury resort properties. “Every restructuring we are in, is a negotiation. It’s pulling people together, finding strengths and weaknesses of various positions and arguments; doing the analytics and finding solutions” Kerzner, a privately held company owned by the Kerzner family, Istithmar World, Goldman Sachs, Colony Capital and Baron Funds, is the largest private employer in the Bahamas, which made the Bahamian government a key constituent for any restructuring. The company faced more than US$2.6bn in CMBS maturities in 2011 which it could not meet. That failure would have triggered cross-defaults globally in seven or eight countries and would have led to a morass of in-court restructurings and potentially the foreclosure and liqu

To see the full digital edition of the IFR Review of the Year, please <a href="http://edition.pagesuite-professional.co.uk//launch.aspx?eid=24f9e7f4-9d79-4e69-a475-1a3b43fb8580" onclick="window.open(this.href);return false;" onkeypress="window.open(this.href);return false;">click here</a>. It has been a remarkable year for the emerging bond markets. Driven by huge inflows into investment funds and record low yields, global primary issuance is on course to break the US$400bn mark for the first time. That issuance has been relatively well spread across all regions: Emerging Europe, the Middle East and Africa, Asia and Latin America. Each has seen well in excess of US$100bn of supply in external debt. Huge volumes only tell part of the story, however. Product development, whether in Islamic finance, bank capital, high-yield, niche currencies or liability management, has also taken a big step forward. “It’s been a transformational year for emerging markets in general,” said Bryan Pascoe, head of global debt capital markets at HSBC. In the past year, HSBC has outshone its nearest rivals – Citigroup, Deutsche Bank and JP Morgan. “We’ve done more volume for more clients in more countries and currencies than our competitors,” added Pascoe. HSBC has printed US$33.45bn from 214 transactions in the countries defined as emerging markets by IFR for this award. That is 64 deals more than its nearest competitor. The bank has executed the most FIG transactions, is the third-ranking underwriter of sovereign deals, and has brought the second-highest number of debut borrowers to the market in the period under review. In local currency, the bank remains far and away the leader, printing more volume in non-US dollar, euro and sterling than the next three competitors in the Thomson Reuters league tables combined. HSBC has also executed deals in more jurisdictions, 30, than any of its competitors.Distinguished role As impressive as these statistics are, underlying them are high-quality transactions in every sub-sector of the asset class. Two of the big themes in emerging markets over the past year, for example, have been Islamic finance and bank capital. In each, HSBC has played a distinguished role. In the former, HSBC has participated in almost every significant deal and is by far the most dominant arranger in a market that really kicked off last year, moving beyond the steady stream of five-year bank deals that has typified issuance in the past. “We’ve done more volume for more clients in more countries and currencies than our competitors” Its transactions include Turkey’s debut sukuk, which was the culmination of nearly a decade’s worth of work and required new legislation to be passed by parliament; Abu Dhabi Islamic Bank’s hybrid Tier 1 perpetual, which is potentially Basel III-compliant and the first such type of deal from the Middle East; Saudi Electricity’s US$1.75bn, five/10-year dual-tranche sukuk, which set a quasi-sovereign benchmark for a country without any externally traded government debt; Qatar’s US$4bn five/10-year dual tranche, which is the largest ever international sukuk; and Indonesia’s third global sukuk. In the local markets, the SR15bn (US$4bn) 10-year for Saudi Arabia’s General Authority of Civil Aviation is the biggest single sukuk tranche ever. As for bank capital, in which annual issuance volumes from the emerging markets have outstripped Western Europe for the first time, HSBC has participated in some of the most innovative transactions. Banco do Brasil’s US$1bn Tier 1 perpetual non-call 11, for example, was the first transaction from Latin America to be structured to be compliant with Basel III regulations. The deal originated thanks to the lead arrangers’ (which also included BB Securities, BNP Paribas, Citigroup and Standard Chartered) discussions with the central bank, which wanted to put a marker down. “The central bank was keen to look at structures that met domestic requ

To see the full digital edition of the IFR Review of the Year, please <a href="http://edition.pagesuite-professional.co.uk//launch.aspx?eid=24f9e7f4-9d79-4e69-a475-1a3b43fb8580" onclick="window.open(this.href);return false;" onkeypress="window.open(this.href);return false;">click here</a>. This was a year like no other in the high-yield bond market. Apart from the occasional downturn that sent issuers scurrying to the sidelines, low interest rates created prime conditions for companies selling debt. With such a strong tailwind, issuers kept turning out in droves. And no bank did more to harness the surge in the high-yield space than JP Morgan. For the 2012 awards period, JP Morgan easily took top spot on the global lead-left league table, spearheading US$70.5bn in issuance from 110 high-yield deals for a market share of 20.1%. The bank also topped the lead-left league tables for the awards period in the US, pricing US$64.5bn from 102 issues for a market share of 21.7%. But the raw numbers alone do not tell the whole story of how JP Morgan used expertise and innovation on a wide array of transactions of virtually every size and variety, including tightly priced and highly complicated deals. “They aren’t just using their muscle to get deals,” said one investor. “I’d say they are actually more conservative than some others. They just have the brand – and no one is really outperforming their ability.” Take the March offer from Air Lease, an unrated US$1bn 5.625% senior unsecured offering due 2017. JP Morgan acted as sole bookrunner for the aircraft leasing company, a first time issuer that chose not to be rated because it expected to become investment grade in the near future – a decision that created a challenge. To convince investors to participate in such a large, unrated deal, JP Morgan came up with a creative solution – coupon step-ups if the company did not achieve a particular credit rating by a set deadline. This structure worked so well that it was later replicated by other issuers. Another example was the US$1.5bn eight-year non-call four senior notes offering for Inmet Mining, which came to market in May – just as the mining sector was coming under pressure due to slowing growth in major production centres. Overall, trade was mired in a risk-off tone at the time, with Greek sovereign debt concerns weighing on the market. But as other mining names attempting to tap the market pulled out, Inmet went ahead – and JP Morgan even managed to upsize the B1/B+ rated deal by US$500m, pricing it at 8.75% at a discount to yield 9%. The deal was mission-critical for the issuer, with proceeds being used to fund development at its Panama mine. And while the issue priced wide of original talk, the 9% level accommodated the upsize, and outflanked the sector downturn and broader market weakness. Air Lease and Inmet were among several first time issuers in deals underwritten by the bank, along with Neuberger Berman, Ladder Capital, NCR and EP Energy. It was another key segment of the market that JP Morgan simply dominated. “These are all mission-critical deals,” said Jim Casey, the bank’s co-head of global debt capital markets. “You don’t want to fail on your first foray in the market.”Over in lev land Meanwhile, though LBO issuance failed to gather much momentum in 2012 – refinancing was the key driver of issuance throughout the year – Getty Images came to market with a US$550m eight-year non-call three senior notes offering in October with JP Morgan at the helm. (Proceeds were used to fund Getty’s US$3.3bn buyout by The Carlyle Group.) The Caa1/CCC+ rated deal priced at 7% at par, on the tight end of talk. At the time it was the tightest LBO pricing since the onset of the financial crisis. Around the same time, JP Morgan also seized the opportunity to price several PIK toggle dividend offerings, as the appetite for these riskier deals returned. Transactions included a US$550m five-year non-ca