US Structured Finance House: Barclays

IFR Americas Review of the Year 2015
4 min read
Joy Wiltermuth

When the ABS market really started to founder this past August, most bulge-bracket firms hung out new signs: “Closed For Business”. But that’s when Barclays made the gutsy decision to step up its presence.

The bank successfully manoeuvred billion-dollar bond deals packed full of consumer assets through choppy conditions, and ended up serving as the structuring agent and lead joint bookrunner on 45% of the month’s consumer ABS issuance.

That helped Barclays increase its share in auto deals – the biggest slice of the consumer ABS market – by 10 percentage points from January to October versus the same period in 2014.

By mid-November, the bank had also edged past Citigroup into the second-place spot in the year’s consumer ABS league table, only slightly behind heavyweight JP Morgan.

The bank was a bookrunner on nearly US$18bn of consumer ABS issues in the year to November 15 for a 10.9% market share, versus JP Morgan’s nearly US$21bn and 12.6% market share, according to IFR data.

For Barclays, the year was about more than just finding a way through choppy seas, though; it was also about putting its own skin in the game to get deals done.

“In a tough market, with tough deals, we provided back-stops, bridge financing and balance sheet,” said Marty Attea, head of the bank’s US securitised products group.

Among its standout trades was the market’s first acquisition finance package completed as a whole-business securitisation since the financial crisis.

Roark Capital used bridge funding supplied by Barclays to acquire Driven Brands, a portfolio of car repair chains. The bank not only funded a US$430m bridge facility for Roark, but also took the relatively rare step of back-stopping its US$460m take-out financing through the niche WBS market.

Aside from providing favourable financing, the trade gave Barclays bragging rights for completing the first-ever franchise ABS deal outside of the restaurant sector.

The success of the Driven transaction had other market participants seeing serious potential for different types of businesses to access the franchise ABS market.

“If you have a brand, or group of brands, that have a good recognition and scale, you should be looking seriously at this market,” said Ronald Borod, an attorney specialising in whole-business ABS at law firm DLA Piper.

The securitisation financing paid investors a relatively low 5.25% yield on a 6.8-year BBB/BBB– bond, which saved the company roughly 250bp per annum versus other funding channels.

Roark was so pleased by the bank’s performance that it awarded Barclays the mandate as sole active bookrunner on its next whole business deal, a US$635m transaction for roast beef sandwich chain Arby’s.

The deal was priced in November, when the market was dealing with even more volatile market conditions, but Barclays was still able to get the 6.7-year securities priced to yield 5%.

And this came around the time that sharply higher borrowing costs – and other headwinds – were knocking many deals out of the market. Porsche, BBVA Compass and Bank of the West all had to shelve deals that they should typically have been able to price: plain-vanilla issues of mostly Triple A rated securities on prime quality collateral.

The Arby’s deal even managed to steal the thunder from Guggenheim Securities – and former Barclays securitisation co-head Cory Wishengrad – which had been the lone dominating force in structuring franchise-backed securitisations.

Wishengrad left Barclays to set up shop at Guggenheim in 2013, just two years after former co-head Jay Kim had defected to Credit Suisse with nearly a dozen Barclays ABS bankers.

But in short order, Barclays has defied strong headwinds of its own to become an important force in the tricky ABS market.

Said Ben Fernandez, a managing director in Barclay’s esoteric ABS group: “Morale is high.”

And not without reason: Fernandez said the bank has now established a dedicated bridge book to bolster more securitisations in the esoteric arena.

“That means high-yield and leveraged finance, not just for ABS,” he said.

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North America Structured Finance House: Barclays
North America Structured Finance House: Barclays cartoon