GE Capital has been the number one debtor-in-possession financing shop in the US for the past five years. In view of the leveraged finance boom, that is a position Wall Street banks are viewing with envy. In March alone, GE Capital lost several key personnel to Morgan Stanley and Barclays Capital, which are both intent on expanding their leveraged finance capabilities.
In an internal memo at Morgan Stanley last month, Michael Hart, co-head of the acquisition and leveraged finance group, announced that the firm had hired two managing directors from GE Capital into its strategic finance group. One was Bruce Buchanan, who will become the new global head of restructuring finance and strategic lending origination.
Buchanan had led GE Capital’s national restructuring group, generating $4 billion of new commitments in debtor-in-possession, plan-of-reorganization and out-of-court restructuring loans and $40 million in up-front fees in 2005. By contrast, deal flow in Morgan Stanley’s whole strategic finance group amounts to $2 billion for insolvency-related deals, growth and acquisitions, recapitalizations, first-lien and second-lien transactions, and synthetic letters of credit.
First-hand experience
Morgan Stanley has had first-hand experience of GE Capital’s dominance in debtor-in-possession financing. For example, last October, GE Commercial Finance and Morgan Stanley were co-lead arrangers of the $1.9 billion debtor-in-possession financing for Delta Airlines.
With its other GE Capital hire, Morgan Stanley has added asset-based lending to its high-yield products. Dan Gioia, who will be responsible for structuring and syndicating asset-based lending transactions at the bank, had been at GE Capital for 17 years and most recently was responsible for a team underwriting cashflow, asset-based and second-lien loans for LBOs, recapitalizations and restructurings.
It wasn’t the only bank that looked to GE to bulk up its leveraged finance team last month. Barclays Capital announced the appointment of Ron Kubick as director in leveraged finance execution from GE Corporate Lending, where he was senior vice-president of origination, also in the restructuring group.
Barclays also added another three directors from Goldman Sachs. They follow Joe McGrath and Rick Van Zijl, co-heads of the leveraged finance business, who also joined from Goldman Sachs earlier this year. At the same time as its two GE Capital hires, Morgan Stanley also hired Robert Louzan from TD Securities as vice-president responsible for managing the bank’s proprietary portfolio of investments in its strategic finance group.
