These are the million dollar questions that seem to be on everyone’s lips. The answers remain ever elusive. However, it is apparent that there is demand for risk diversification and the disposal of non-core and toxic assets from balance sheets to free up liquidity and/or capital. Although the banks have been working hard to meet the capital adequacy requirements of the new regulatory regime, the sovereign debt events of the past couple of months have done nothing to improve the main problem facing them - access to funding.
Consequently, this has resulted in CORRELATE SEARCH’s clients showing interest in candidates who offer problem-solving skills, especially in the areas of balance sheet and liquidity management. The Holy Grail for many is that rare candidate whose skills combine solutions-structuring capabilities with revenue-creating commercial nous. This is a situation that is certainly not unexpected in this market, as we touched upon in our last credit editorial of 10 June 2011.
The solutions providing game is not restricted just to banks – other players have parlayed their existing expertise into revenue-earners by fixing the problems of other financial institutions. Buy side firms active in this space include CAIRN CAPITAL advising clients on their structured credit portfolios and AGFE providing an advisory service in fixed income, structured finance, leveraged finance and infrastructure. CAIRN recently hired Simon Davies as a restructuring adviser from BLACKSTONE and opened new offices in Connecticut to expand this offering to North American clients while AGFE doubled its gross profits in the last financial year. Of the traditional advisory firms, LAZARD has made the boldest statement in this regard, with the recent acquisition of a five-man team to spearhead this offering.
Elsewhere in the credit markets, there are still bids for experienced flow traders. After the flurry of musical chairs in the financials space earlier in the year, there has been recent movement on sterling credit desks. BARCAP lost Paul Hawkins and Caroline Grant to SANTANDER within a few months of each other and is believed to have filled the holes by enticing Craig Colenso and James Okkerse away from UBS. Surely, there’s more movement to come in this space.