work hard for little money


Leveraged finance is still in trouble in 2023, as Blackstone’s Q1 results reflected today. Leveraged finance revenues in Europe and the US fell 63% and 62% respectively in the first quarter as interest rates rose and leveraged deals fell, according to information provider Dealogic. .

It might therefore be inferred that leveraged finance and financial sponsor bankers do not have much to do.

that is not correct.

“There are very few high-value deals, but we all work hard,” recalls the Managing Director (MD) of the European Bank’s financial sponsorship team in London. “- It’s the strangest market,” he adds.

Leveraged finance is similar, but different. The MD of a rival bank’s leveraged finance says the issue isn’t just the volume of leveraged finance deals, it’s the type of deals being done. “We’ve actually done a lot of trades this week,” he said, adding that the pipeline of trades will run at moments when the market calms down. “Most of the trades we do today are best effort trades,” he says. “They don’t involve underwriting, so fees are low – we simply issue bonds on a best-effort basis.”

In the past, 70% of deals were underwritten, he adds. “He’s closer to 20% this year.”

Both MDs are working less hard than they used to, but much less productive. The same applies to their team. “We have thousands of conversations with our clients, and everyone is afraid of missing out,” says the first MD. “And Junior is busy doing thousands of analyses.”

The job frenzy explains why bankers in both sectors have not been cut as aggressively as falling revenues suggest. , but most teams still have a lot of work to do. “The general impression is that the collapse of leveraged finance deals is exaggerated,” said Leveraged Finance MD.

This does not mean that the future is guaranteed. “Risk is almost impossible to price at this point,” says the financial sponsor, MD. “No one knows if you’re buying a falling knife. And there’s still a big difference in price expectations between buyers and sellers.”

Top Banks in Leveraged Finance 2021-2023

Source: Dealogic

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Photo by James Wainscoat on Unsplash

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