Best global loan house:
Bank of America Merrill Lynch
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Also shortlisted: |
An intense focus on building its strategic footprint outside the US means that Bank of America Merrill Lynch is now a truly global loan provider. For thoughtful solutions globally across both investment grade and high yield, the bank is Euromoney’s global loan house for 2015.
Bank of America Merrill Lynch is a lending powerhouse. According to Dealogic, it was mandated lead arranger on 1,695 facilities during the awards period, representing $337.9 billion of business and a 7.3% market share.
“It all starts with this product,” says Peter Hall, global head of investment-grade loan syndicate at BAML, based in Charlotte, NC. “Bonds, hedging, M&A are all built around loans. This is the primary product and it is critical to our franchise.”
With 70% to 90% of the global loan market being US based, size and depth in these markets is crucial. Last year, with the focus increasingly on M&A, expertise in acquisition lending was also a prerequisite. In addition to topping the M&A bookrunner league tables by number of deals, BAML was integral to some of the key transactions of the year. “No one else has this much experience in and dedication to this platform,” Hall says. “We focus on the right client base and have expertise in all their capital needs.”
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We are confident in our expertise in both bank and bond financings. We like to see a competitive mix between the two – it adds a little pressure
Peter Hall, |
A key theme in M&A during the awards period was the crackdown on tax inversion trades, whereby US corporations have redomiciled overseas for tax purposes through an acquisition. The $49.9 billion tax inversion takeover of Ireland-based Covidien by Medtronic created the medical device sector’s largest company, and BAML was sole lead arranger, sole bookrunner and sole underwriter on the $16.3 billion underwritten bridge facility. The bank was also the lead left on the $3.5 billion revolver, $3 billion term loan and $17 billion bond offering. “Our client selection and expertise is coming to fruition on the M&A side,” says Hall. “No one has the distribution insight that we do, and there wasn’t a major healthcare transaction that we didn’t do.”
Volatility in the markets meant that not every situation was straightforward. BAML’s full debt platform was brought to bear in October 2014 with Southwestern Energy’s acquisition of SW Marcellus Properties from Chesapeake Energy as oil went from $82 a barrel to $48.9 a barrel. BAML was sole lead arranger, sole bookrunner and sole initial underwriter on the $5 billion senior unsecured bridge loan and worked with Southwestern Energy for over four months on capital structure and market communication. It was subsequently lead left bookrunner on $2.2 billion senior secured notes and $1.725 billion mandatory convertible preferred stock.
BAML’s strength in both loans and DCM means that it can be genuinely product agnostic. “We might give clients three or four alternatives and will give completely agnostic advice,” says Hall. “We never drive them to one product.
“Treasurers feel that this is a good time to be locking rates in, and the bond markets have benefitted from this. But we are still seeing a very competitive bank market and there is pressure on spreads. We are confident in our expertise in both bank and bond financings. We like to see a competitive mix between the two – it adds a little pressure.”
BAML’s lending expertise is increasingly global. “We are building out our strategic footprint,” says Hall. “In the last five years there has been a very intense focus on Europe and a push to deliver more product.”
The bank was one of three underwriters on the $14.2 billion bridge and term loan financing for Bayer AG’s acquisition of Merck’s consumer-care business. BAML was also joint underwriter, bookrunner and facility agent on the €2 billion term loan A, €3.5 billion term loan B and €1 billion bridge for the €6.5 billion acquisition of assets from Holcim and Lafarge by CRH. In Hong Kong the bank was joint underwriter on the HK$55 billion ($7.1 billion) bridge loan and joint global coordinator, joint bookrunner and MLA on HK$55 billion senior loans for CK Property Finance’s reorganization and spin-off. BAML was also joint sponsor on its listing. “When we go into Asia we are increasingly winning a significant amount of business,” claims Hall.
Leveraged finance
The push outside North America extends to leveraged finance as well, where BAML has successfully leveraged both its large balance sheet and its distribution capability to remain entrenched at the top of the business. “We do over 1,000 deals a year in leveraged finance – one in every eight deals that happen,” says Jeff Fritsche, managing director in leveraged finance capital markets. “This gives us the expertise to interface with all key institutional investors and banks.”
The recent Royalty Pharma refinancing deal saw the bank sell $2.8 billion add-on term loan B paper to banks and CLOs at par and syndicate a second-lien loan into the high-yield market. The Formula 1 recapitalization in July last year involved $4.23 billion of senior loans to refinance $1 billion of high-yield notes and fund a $1 billion dividend. The deal was done during the summer despite softer markets and concern over the new US leveraged lending guidelines.
