CIBC Grows European Leveraged Finance
Byline: Vivek Ahuja
A banking retreat from European leveraged finance has allowed CIBC World Markets, the investment banking subsidiary of Canadian Imperial Bank of Commerce, to establish itself as a leading player in the sector.CIBC, whose global franchise is based on business from financial sponsors, set up its European leveraged finance team in the first half of 1999 with the aim of becoming a top-three provider of finance to European private equity companies within five years.
By the end of last year, the Canadian bank, which does not figure among the top players in the broader international bond markets, occupied the runner-up spot in the rankings for mandated lead arrangers of sponsor-driven leveraged buy-out loans. Its position was boosted by the withdrawal of other banks from the sector as they focus on their core competencies. CIBC also has an eye on joining the top five arrangers of high-yield debt, but despite its rapid progress in the sector, Chris Rist, head of European leveraged finance, says the bank holds no aspirations to become the number-one player.
CIBC's leveraged finance franchise in Europe follows an unusual model that incorporates mezzanine finance and high-yield debt sales, trading and origination under the same umbrella. These areas contribute to a single profit and loss account and follow the same reporting hierarchy, which Rist says makes CIBC's franchise "product-neutral" and attractive to clients that are wary of banks pushing certain products.
The strategy is more transparent than that followed by other banks, where high-yield debt falls within the realm of fixed income while mezzanine finance is run within the corporate finance division, says Rist.
The European franchise has benefited from CIBC's commitment to its core technology, media and telecoms and financial sponsors leveraged finance divisions in North America, where the bank is consistently among the top 10 players. Its strong domestic presence helped to reassure European companies that CIBC, unlike many of its competitors that have been scaling back or exiting their leveraged finance operations, remains committed to the market in the long term.
Rist admits that the bank's progress has been aided by good timing - CIBC was able to recruit experienced bankers following mergers between players such as Bankers Trust and Chase Manhattan, two important groups in the leveraged finance arena before their alliance, and between UBS and Warburg Dillon Read.
The leveraged finance team at CIBC has grown under Rist's leadership and comprises more than 40 staff. But even CIBC has been hit by the adverse market conditions and four bankers have quit the team since CIBC announced bonus payments late last year. The Canadian bank last week recruited Nils Bennemann, a leveraged finance banker from Lehman Brothers, and promoted Tim Kelly from its graduate programme. …