As Blackstone’s Q1 results reflected today, there are still issues with leveraged financing in 2023. With interest rates to rise And Falling leveraged tradesEuropean and US leveraged financing revenue fell 63% and 62%, respectively, in the first quarter, according to information provider Dealogic.
So it might be assumed that the philanthropic bankers and financial finance have little to do.
That would be incorrect.
“There are very few high-paying deals out there, but we’re all working hard,” says the managing director (MD) on the financial sponsorship team at a European bank in London. “- It’s the most unusual market. Everyone’s busier than when we actually did the deals, but very little is going on.”
Another London executive in leveraged finance at a rival bank said the problem was not just the size of leveraged finance deals, but the type of deals being made. “We are already doing a lot of deals this week,” he says, adding that the moment there is calm in the markets, the series of deals are executed. The only problem is that those deals are less lucrative in terms of fees. “Most of the deals we’re doing now are best efforts,” he says. “It doesn’t involve underwriting, so the fees are low — we simply place bonds on a best efforts basis.”
In the past, he adds, 70% of deals were oversubscribed. “This year it’s close to 20%.”
The upshot is that in finance and financial sponsors, London bankers, at least, say they are working as hard – if not harder – than before, for less money. “We have thousands of conversations with clients. Everyone is afraid of missing out,” says the senior doctor. “And the little ones are busy doing thousands of analyses.”
The frenzy of the business explains why bankers in both fields have not been shut out as initially expected. Goldman Sachs cut Levin’s staff last year and Barclays hired an assistant for him in London this week, but most teams still have plenty to do. “The general feeling is that the collapse in leveraged finance has been overblown,” says the leveraged financial manager.
However, this does not mean that the future is guaranteed. “It’s almost impossible to price the risk right now,” says the managing director at Financial Sponsors. “Who knows if you’re buying a falling knife? And there’s still a huge variance in price expectations between buyers and sellers.”
Best banks for leveraged financing 2024-2023
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