Guy Hands began his career in Eurobond trading at Goldman Sachs in the early 1980s. He made his name at Nomura in the 1990s with the pioneering securitization deals of its Principal Finance Group.
Now he is head of Terra Firma, the leading private equity firm that has invested €17 billion in 34 businesses since 1994, with an aggregate enterprise value of over €48 billion.
His earlier focus on securitization came about almost by accident. He did some individual credit trades as early as 1984: floating-rate note securitizations and a number of other collateralized bond obligations.
“1989 was the first year that I lost money. I had made money for six years,” he recalls. “In my review in 1988, my boss said: ‘You haven’t lost money, so you haven’t taken enough risk. Double your positions’.
“So, I did. I went on holiday for two weeks in August 1989 and when I came back the bond market had closed down. I tried to move the book but didn’t make any progress and it became steadily more frozen. Then November came and with it the failed UAL deal and then the Japanese bubble burst. I was stuck with $1 billion of bonds I couldn’t sell and I had to mark down. So I had to find a way to get rid of the bonds.”
The way he did that was to securitize them.
After the markets froze in 2007, Hands attracted the ire of many banks with comments that he made at the SuperInvestor conference in Paris in November of that year.
“Though often loyal and keen to help private equity, bankers can act like dogs – they are most happy in a pack and when they smell an easy deal, they go into a feeding frenzy, each trying to push the others out of the way to get top billing,” he declared.
“But even loyal dogs, when they are hit hard, whimper and retreat to their baskets – and the banks have been hit very hard in recent months and are facing substantial losses. So, don’t expect them to come out of their baskets and provide the level of debt on cheap terms which private equity needs for some time,” he warned, correctly.
Not surprisingly, many banks were not impressed – he still has a box of dog biscuits that was sent to him by a UK lender at the time.