Leith Robertson seems pretty laid back as he talks about the market in his bigger and better leveraged finance department at the Royal Bank of Scotland (RBS). He has, he says, had a seriously bad day. You’d never guess.
But then again – what does he really have to stress about? RBS finished last year top of the league European debt provision for buyout transactions. It managed some E6.9bn of debt last year, almost E1bn more than its nearest competitor, Deutsche Bank. RBS also ranked highly in the mezzanine table – third with E735m after Intermediate Capital Group (E2.6bn) and Credit Suisse First Boston (E1.2bn), according to statistics from Zephus Corporate Finance Knowledge.
And the successful £38.5bn takeover of NatWest has strengthened Robertson’s hand further. “RBS already had adventurous plans for leveraged finance,” he says. “But in terms of desire to get into larger deal-arranging, NatWest has made that a lot better, and the combination of two sets of capital markets divisions gives us terrific support.”
His merged leverage finance department could soon have the opportunity to start flexing its muscle because the high yield market is showing signs of recovery after last year, when it effectively closed. “There are definitely signs that market will re-emerge,” says Robertson. “There is a desire for paper from investors.”
Sure enough, United Biscuits has just issued a two-tranche high yield bond. United Biscuits was acquired last year by Finalrealm, a consortium of financial investors including Cinven and DB Capital Partners.
In any case, Robertson argues that the capital markets have had less of an influence on the buyout market than might be imagined. “There has never been a hiccup in ability of the banks to deliver debt,” he says.
Banks can also help themselves by not limiting themselves to specific sectors. Robertson says RBS believes there are good deals to be had in all sectors, but he counsels caution. “We have to be clear about the syndicatability of the loan [to a company in a particular sector],” he says. “You need to understand where the banking market lies in respect to certain sectors.”
Other trends are affording banks more breathing space in the buyout market. Bank consolidation, for example, will lessen the scramble for mandates. “It’s bound to be a good thing,” says Robertson. “It takes out a competitor.” The process of integration also disrupts existing operations. “It’s hard to keep the whole show on the road during such a traumatic process,” he says.
But the market is bound to settle down and come back. Banks are building up their teams for a renewed assault on the market. Yet Robertson says he feels there is less competition than there was at the beginning of last year. “I see the competition,” he says. “I see the gearing up, but we’re not feeling it.”
He may do soon – this transition period could be the calm before the storm. “I’ll probably find tomorrow that we’ve lost three lead mandates,” he quips. If so then he may need a slug of scotch to pull through. Single malt? “Depends who’s paying,” he says with a broad grin.