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Best High Yield House: Deutsche Bank |
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Also nominated: Credit Suisse and Bank of America Merrill Lynch |
The past 12 months has been a rollercoaster ride for the high-yield market. It has enjoyed periods of record inflows and new issuance, as well as extreme volatility and sporadic access. Navigating such a choppy seascape requires not only a first-class origination and distribution platform but also a truly global franchise. Deutsche Bank has demonstrated both over the past year and is Euromoney’s global high-yield house for 2012.
“We are not a commoditized lender and our high-yield business is not based on capital commitment,” says Mark Fedorcik, global head of leveraged DCM at Deutsche Bank. “We have to compete with hustle and ideas. In future every company in every country is going to want a pipe into the rest of the world and no other high-yield house is as well positioned as we are across the US, Europe and Asia to provide this.”
The persistent problems in the eurozone precipitated a wave of issuance in US dollars from the region’s corporates. While Deutsche has been dominant in this business, it has also impressed with its efforts to maintain issuance across currencies. “As a lot of companies gravitate towards dollars we are focused on keeping issuance in euros,” says Henrik Johnsson, head of European high-yield capital markets. “We don’t want to lock companies that don’t have a reason to issue in dollars out of the market.”
When Polish telecoms firm Polkomtel was looking to clear its hung LBO bridge loan in January, the initial view was that the deal would come in dollars. “We had done a lot of pre-wiring for Polkomtel in the US and had done a non-deal roadshow,” says Johnsson. “We thought the deal might be all dollar but we had a lot of success in euros, which resulted in a better outcome for the issuer.” The €900 million equivalent deal was the largest CEE high-yield bond ever and included the first PIK issuance by a company operating in Poland. It included $500 million and €542 million tranches that yielded 12% to 12.5%.
Deutsche’s dominance in the euro market was again in evidence on the February jumbo transaction for Schaeffler, a German ball-bearing manufacturer. The €2 billion deal, part of the company’s €8 billion bank and bond refinancing, was the largest ever transatlantic deal for a debut issuer and the first jumbo deal in Europe since June last year. It was also the landmark deal for the European market as it was the first to give full proportional voting rights to bondholders in a restructuring. The prevailing view had been that the deal would come in dollars but in the end the euro tranche was the larger one.
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“The value of our business is in cross-border deals, first-time issuers, smaller illiquid trades”
Mark Fedorcik, global head of leveraged DCM, Deutsche Bank |
“If a deal is properly marketed in Europe, it can get done,” says Johnsson. This was also demonstrated with HeidelbergCement’s SFr150 million ($156.7 million) deal in October. Deutsche sole-led the deal, through which the company diversified its funding sources, and achieved this at a 100 basis point discount to primary euro issuance it had undertaken two weeks earlier.
Deutsche’s strength in Europe is a given, considering its status among German corporates, but it also has clout worldwide. “In Asia the challenge is to compete with bank debt – it is the reverse of the situation in Europe,” says Johnsson. “But we can compete by doing different things: foreign currency, hedging. You need a much broader product suite.” The bank was joint bookrunner on Shui On Land’s $400 million three-year deal in February, the first Chinese issuer to tap the market since May 2011.
It is a top-five bank in the US, competing against domestic banks with large lending platforms. “Companies want to use banks that will deliver,” says Fedorcik. “The value of our business is in cross-border deals, first-time issuers, smaller illiquid trades. Many of our competitors concentrate on straightforward T-plus-300bp business – we will concede T-plus-300bp business all day.”
Colorado–based satellite and video operations company Echostar mandated Deutsche as sole left lead in its $2 billion issue to fund the acquisition of Hughes Communication. This was the largest sole bookrun offering in the past 12 months. Deutsche was also sole bookrunner on satellite TV firm Dish Network’s $1.9 billion trade, which at 4.625% for five-year notes was the tightest true high-yield execution in over a decade.
In terms of global reach it would be hard to top the Consolidated Minerals deal, which closed in April last year. The $405 million five-year deal was for a manganese-ore producer company owned by a Ukrainian with mines in Australia and Ghana that sells its product to China. “We organized a roadshow in Singapore, Hong Kong, London and the east coast [of the US] – it is very rare for that to be done for a high-yield deal, it was very unconventional,” says Johnsson. “We don’t do off-the-run stuff. We do business that requires brains and energy.”
