HSBC: Strong bank takes on junk credits
HSBC’s rise up the equity capital markets rankings in the past 15 months has caught the eye but it is not the only high-margin area where the bank aims to build on its core capacity as a lender. Kevin Adeson was first hired to build an acquisition and leveraged finance business, at the peak of the LBO market. He hasn’t lost sight of that business, even as it collapsed and other banks pulled out or shrank down. Today he thinks it is more attractive than ever before.
"Leverage multiples on deals are half what they were before, or even less. You are seeing deals with 40% equity, 60% equity, even 100% equity. So for those lenders with capital to put to work the credit dynamics have never been better and the economics in both fees and margins are substantial. HSBC is already a lender to many of the sponsors and often to companies in which sponsors might be interested. Companies and sponsors should know that if they want a big, well-structured deal, HSBC can deliver that and what’s more they can also rely on us for take-out in the bond and equity markets."
The bank’s push into leveraged finance has been picking up steam since the summer of 2009, when HSBC financed KKR’s LBO of Oriental Brewery from InBev in Korea.