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Capital Markets

Debt market round-up: Banks becoming more stressful

Barclays has announced the appointment of Matt Barrett as head of distressed debt and special situations investing. He is joined by two more new hires to work as managing directors in the same department, as Barclays looks to substantially increase its power in this market.

This comes as news emerges from Citi that it is moving Mark Tsesarsky, co-head of global securitized markets, to head of special situations/securitization. Citi say that this will be "a prop effort focused on distressed debt". Last year, Deutsche Bank, which is one of the largest players in the European distressed market, increased its manpower by almost one-third.

It would seem that the major banks are priming themselves as they bolster their distressed debt units. Other banks said to have built out distressed debt capability include leading leveraged finance banks such as Credit Suisse, and Morgan Stanley as well as Lehman Brothers. Stanley’s is one of the biggest distressed debt teams and has a quasi private equity take on its activities.

Back in the late 1990s, distressed debt in Europe was a very limited market, with only a few specialized investors. But ever since the high-profile technology, media and telecoms collapses of 2001/02 brought interest from US hedge funds, it has skyrocketed. And in less than a decade, the leveraged debt market has grown by more than 1,000% to around $600 billion.

This extraordinary growth makes the current situation unique. What sets it apart from previous cycles is the sheer amount of leverage involved.

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