Deutsche Bank Is Said to Woo Buyout Giants to Finance Deals
(Bloomberg) -- Deutsche Bank AG is deploying top executives, as well as billions of dollars, as it seeks to win more business with Wall Street’s most active dealmakers.
Chief Executive Officer Christian Sewing and other senior managers at the bank have fanned out in recent weeks to meet leaders of big U.S. private equity firms, looking to strengthen relationships and drum up mandates for financing buyouts, according to people with knowledge of the strategy. The charm offensive follows a decision by the bank this year to make more money available for non-investment-grade debt -- dedicating roughly $16 billion of its balance sheet to the effort, up from about $12 billion previously, one person said.
“It’s a piece that does fit as part of our strengths within the Americas, we’re not going to hide from that,” said Mark Fedorcik, co-president of the investment-banking business, who declined to comment on the balance-sheet commitment. “We have strong relationships historically with private equity.”
Buyout firms amassed a record amount of cash last year to make acquisitions -- firepower they typically magnify by borrowing heavily with help from banks. Frankfurt-based Deutsche Bank is looking to rebuild its share of the U.S. market, despite recent defections by senior dealmakers. The firm ranked among the top five arrangers of U.S. leveraged loans before the financial crisis, and slid to No. 9 last year, data compiled by Bloomberg shows.
This year, Deutsche Bank has climbed back to No. 7. It won top spots on Blackstone Group LP’s agreement to buy Spanish gaming company Cirsa Gaming Corp. and Stars Group’s purchase of Sky Betting & Gaming, one of the biggest new-money deals in the market.
The gains are a bright spot as Deutsche Bank’s shares trade near the record low they touched last month, after a management reshuffling and plans to reduce its global presence failed to win over investors. The lender is cutting at least 7,000 jobs and paring back businesses in the U.S. and Asia after three attempts to restore profitability in recent years ended up eroding revenue. It’s also hired a unit of Cerberus Capital Management for advice on how to reach Sewing’s profit targets.
The leveraged-lending business is dear to Fedorcik, who estimates the high-yield bond market and leveraged loan pool to be about 20 billion euros ($23 billion) globally. He climbed Deutsche Bank’s ranks by winning corporate-finance deals. In May, the firm promoted him again, putting him at the forefront of a push to cut costs while focusing on areas of strength.
Yet the bank’s overhaul efforts have also spurred departures. Richard Park, a managing director in the financial-sponsors group, left for Mizuho Americas LLC, a person with knowledge of the matter said this week. Last month, news broke that the two heads of Deutsche Bank’s U.S. leveraged-finance business, Scott Sartorius and Christopher Blum, were leaving to joining Citigroup Inc. and BNP Paribas SA, respectively. The German bank named Ian Dorrington and Manfred Affenzeller to succeed them.
Other executives visiting buyout firms include Sean Murphy, co-head of global leveraged debt capital markets; and veteran private equity bankers John Eydenberg and Michael Walsh. In late June, Sewing also visited some corporate investment-banking clients in the U.S. and held a town-hall meeting with employees in New York, a person with knowledge of the matter said.
Deutsche Bank is among a crowd of European lenders such as Barclays Plc and Credit Suisse Group AG vying in the U.S. for leverage-lending mandates, a business that often commands higher margins than other investment-banking activities. Regulators in the U.S. have also been making it easier for banks to extend credit to companies.
Fedorcik said he’s trying to repeat the success he’s had in recent years building up industry coverage in financial services and health care.
“It’s an area where we want to continue to be in the top five,” Fedorcik said, referring to leveraged lending. Sewing has been “very receptive to the business needs, and that’s encouraging to the business and our client universe as long as we remain disciplined around risk.”
Deutsche Bank this year helped finance Veritas Capital’s $1.05 billion cash deal to acquire a health-care business from General Electric Co. and Abry Partners’ deal to buy a controlling stake in cinema company Screenvision Media. It also worked on arranging debt for the agreement by CVC Capital Partners to buy drugmaker Recordati SpA for about 3 billion euros.
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