Much of the period under review for these awards was one of booming capital market volumes across all products. The story was recovery from Covid and business as usual. Today, however, that market can only be seen in the rear-view mirror. Good advice is of paramount importance and is the differentiator in tough and unpredictable conditions. That comes from listening and watching, knowing what matters and what doesn’t.
“We talk to corporates all the time,” says Mo Assomull, global head of capital markets at the world’s best bank for financing this year, Morgan Stanley. “The rates environment was prolonged by Covid, but we realized last year that the rates environment would change. The change has been much sharper than anyone anticipated. The reaction had been building for years and is a multi-decade change.”
This is where deep experience comes in.
“The seniority in this group is a critical differentiator,” he tells Euromoney. “If you are under 35, you have only lived in a central bank-fuelled environment. Those central banks are now saying: ‘We are not the solution to every problem.’”
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In good times and bad, advice is critical – and this is where this experience shows.
“2007 and today are night and day,” says Dan Toscano, global head of leveraged finance at the US bank. “The leverage in the system has all gone. Multiples are huge but not outrageous. Passive has become 50% of the market. It is very regulated and carefully monitored, and leverage has been dramatically reduced. Corporate balance sheets are much stronger now than they were then.”
There are lessons from history on the equity side too.
“This is not 1999,” points out Evan Damast, global head of equity and debt syndicate. “It is very topical how much tech companies have corrected, but, unlike past corrections, many tech issuers are likely to become profitable. Hedge funds and banks on the equity side have learned so much from the financial crisis.”
The bank chalked up a roster of impressive deals during the better market conditions that persisted before the recent volatility set in. Those included left lead on the third-largest tech IPO in history for Rivian Automotive in November, which raised $13.7 billion. The firm was also left lead on Nubank’s $2.9 billion IPO in December, a deal that required coordination across 14 bookrunners.
One key deal last year that demonstrates the strength of the whole franchise was the September $3.4 billion following offering for VICI Properties to finance the purchase of MGM Growth Properties, the second-largest gaming real estate investment trust. The deal was launched into a choppy market that traded down 2.2% during the marketing period but priced at a file-to-offer discount of 7.1% – something that would not be available today.
“With VICI, it wasn’t obvious that that quantum of capital would be available,” says Assomull. “We had the confidence to go in one shot.”
The bank always emphasizes the virtue of its non-siloed approach and the natural engagement that it fosters. This was recently extended to all syndicate desks – including investment grade, leveraged finance and equities – sitting together.
“What I try to instil on our floor here is to make sure that syndicates are all talking to each other,” Assomull explains, “that the telecoms ECM team is talking to the telecoms DCM team. We are set up to capture client mindshare in as holistic a way as possible. This leads to a bigger piece of their wallet.”
This should pay dividends as markets become more complex and advice needs to be more flexible, particularly with a view to private solutions when public markets are no longer an option. Bankers need to look outside their own world to understand other markets.
“Private debt is a very un-understood phrase,” Toscano points out. “A lot of people aren’t picking up their phones now. Private capital is a very flexible tool that we didn’t have five years ago. We have kept it as a cross-asset class discussion on this floor. It shouldn’t be siloed, and we keep it very agnostic.”
If you are under 35, you have only lived in a central bank-fuelled environment. Those central banks are now saying: ‘We are not the solution to every problem’
Mo Assomull
Sustainability is clearly now a core part of any bank’s financing franchise, and Morgan Stanley has been involved not just on the sustainability side but also on much diversity and inclusion work. When Amazon priced its $18.5 billion sustainable bond issue in May last year, it included six minority firms that were added as co-managers and generated $1.3 billion in orders between them. Morgan Stanley was diversity and inclusion coordinator and active bookrunner on the deal. In August, it led a $1 billion sustainable bond offering for Pfizer.
The US firm was busy on the sovereign side too. It was joint bookrunner on the European Union’s inaugural benchmark under its Next Generation EU programme and was the number-one underwriter for the EU during the awards period, raising €11.6 billion across five deals. In March this year, it was joint bookrunner on the $2.25 billion debut environmental, social and governance global bonds offering from the Republic of the Philippines.
The coming year will present a very different set of challenges to all banks. How they negotiate what is likely to be a paradigm shift in market conditions will demonstrate how much longevity and experience matter.
“We have always been focused on unique advice to clients: offence versus defence; need versus want,” says Assomull. “Pre- and post-Covid, fundraising was sometimes too easy, and this got lost in the shuffle.”
