LevFin in London

Hi all,

There have been attempts before to have a discussion on which are the best LevFin teams in London, but those threads have not got that far. This is another attempt.
And I am not asking about deal volume/value, I am asking about analyst experience and perceived exit opps to credit shops & PE (so for example the fact that FS does most of the FS-related LevFin work in a given bank, not the LevFin team should be factored in).

Half-random guess to get this conversation going:
Tier 1
BAML, DB, CS, JPM, Citi

Tier 2
HSBC, BNP, GS, MS, Barclays, ING, RBS, Credit Agricole

Tier 3
SocGen, UniCredit, UBS, Commerzbank

Many thanks,

 

As someone currently working in US LevFin, below is my view in terms of EU LevFin deal flow (in no particular order):

Top 1-5: DB (clear #1) then, GS, Barclays, Citi, JPM Top 5-10: BNP, BAML (although has been on the rise), CS, HSBC, MS

Just keep in mind that in Europe, the leveraged finance capital markets is relatively a lot smaller than the US (about 3-4x smaller), so in terms of deal flow, it will pale in comparison to your US counterparts.

Array
 

Tier 1: DB/CS/JP/ML Tier 2: UK commercial banks (Barclays, HSBC), French commercial banks (BNP, SocGen), GS, Citi Tier 3: Rest...the Commerzbanks, Unicredits, Credit Agricolore, RBS etc etc but these banks are also "good" at loans/lending (little ambition to make returns on those products...). Would throw MS and UBS into that bucket too...they aren't great in this space (good in acquisition financing but little to no loans business and outsource their modelling).

Note that there are huge gaps between T1, 2 and 3 (particularly between 1 and 2) given that Lead Left/Physical Bookrunners are a thing as these bookrunners take the lion share of the fees home...it's literally a success-begets-success business and its hard go break into the T1 bucket.

Also a lot of the banks have thrown LevFin together with Sponsors and even together with IG DCM whereby particularly the latter is a completely different ball game (lending crucial so all the commercial banks are essentially T1...)

 

Very informative comment, many thanks. To probe a bit further, what are the main differences between T1 and T2 when it comes to the work done - does the fact that you are not in a team that is usually lead left mean that what you do is to analyse if your bank would like to be a joint arranger? Is the work done then significantly less technical? Or to ask in another way, if one wants to go to a distressed debt / credit fund post-IB, would it makes sense: 1. Top RX groups 2. Top LevFin groups (T1 as you define) 3. Top M&A groups 4. T2/T3 M&A (as even if you are T2 M&A, you will be doing proper analysis on your own and have client contact, which does not seem to be the case that much in T2/T3 LevFin) 5. T2/T3 LevFin

Thanks,

 

Very informative comment, many thanks. To probe a bit further, what are the main differences between T1 and T2 when it comes to the work done - does the fact that you are not in a team that is usually lead left mean that what you do is to analyse if your bank would like to be a joint arranger? Is the work done then significantly less technical? Or to ask in another way, if one wants to go to a distressed debt / credit fund post-IB, would it makes sense: 1. Top RX groups 2. Top LevFin groups (T1 as you define) 3. Top M&A groups 4. T2/T3 M&A (as even if you are T2 M&A, you will be doing proper analysis on your own and have client contact, which does not seem to be the case that much in T2/T3 LevFin) 5. T2/T3 LevFin

Thanks,

 
Best Response
mrdraper:

Very informative comment, many thanks.
To probe a bit further, what are the main differences between T1 and T2 when it comes to the work done - does the fact that you are not in a team that is usually lead left mean that what you do is to analyse if your bank would like to be a joint arranger? Is the work done then significantly less technical?
Or to ask in another way, if one wants to go to a distressed debt / credit fund post-IB, would it makes sense:
1. Top RX groups
2. Top LevFin groups (T1 as you define)
3. Top M&A groups
4. T2/T3 M&A (as even if you are T2 M&A, you will be doing proper analysis on your own and have client contact, which does not seem to be the case that much in T2/T3 LevFin)
5. T2/T3 LevFin

Thanks,

If you're not lead left, or an MLA taking a serious commitment--you're effectively preparing an internal credit application to ensure your bank has the ability to commit to the deal. Therefore, the analyst experience at BAML, will be very different than the analyst experience at Mizuho. For example, BAML (as an entity) will be heavily involved in syndication strategy, pricing, structuring and documentation. Mizuho will not be involved in any of that (other than for box ticking the credit application). BAML will be very client facing, likely in contact with the sponsor/borrower multiple times a day. On the other hand, Mizuho will probably speak to the sponsor twice throughout the entire deal. Once to originally commit to the deal and second for a principal discussion to get Mizuho comfortable with some point on its credit application.

Its also worth noting that in lev fin, T2 and T3 are not interchangeable. There is a huge difference between HSBC and Commerzbank. HSBC still runs deals and takes huge commitments. Commerzbank, at best, will hold some of the RCF and look to provide some ancillary LC, FX, etc services. Its probably better to conceptualise the difference between T1 and T2 by prestige and deal quality. For that reason, I would probably move UniCredit and RBS up to T2 as the former is heavily involved in Italian PE (which is very hot at the moment) and the latter has historically been big in lev fin due to its balance sheet. The difference then between T2 and T3 is whether you'll ever see the left side of the OM/top of the facility agreement and therefore be involved in syndication strategy, pricing, structuring and documentation. I largely agree with mxp's division amongst tiers.

In terms of what you should prioritise to obtain a role in distressed investing or credit funds, its important to consider the strategy you'd like to work in. For example, if you're looking at a credit fund that does direct lending and long term holds on leveraged loans you should prioritise 2, 4, and 5. M&A will give you some prestige in terms of the name behind you, but not the same skills. Sell side M&A and leveraged really are very different things (particularly generic corporate sell side M&A). I think this forum sometimes generically jumps to "modelling skills>everything else". But its important to realise there is something to be said for understanding the intricacies of the loan world which you can't pickup overnight....

If you're looking for distressed/special sits strategies, then I'd say your order is about right.

 

Seems like all of the above is based on rankings for HY bond instruments i.e. If you're looking at european leveraged loans league tables the picture is somehow different with the 4 French banks + UniCredit + a few other (e.g. ING) leading the pack. Note that many of those institutions have decentralized, smaller LevFin teams split on a regional basis (FBe, DACH, Nordics, ItEs, etc.) with only HY (market) teams gathered in London. The levloan market has been on fire in Europe during the last 2 years and as teams are smaller, exposure to top sponsors and experience gained in modelling/doc/deal structuring/syndication are extremely valuable - eg in my institution all the modelling is done in the respective regional LevFin team even if the deal is eventually backed by bonds. PM me in case you'd like more info

 

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