The announcement comes hard on the heels of Sean Wallace's move to Darby Overseas Investments, where he will focus on attracting additional funds to support the firm's existing mezzanine activities in Asia and help expand its private equity capability in the region. Wallace was JPMorgan's head of Asia capital markets.
The team includes two new executive directors. Graham Conran, who has moved to Hong Kong from the New York office, adds leveraged buyout experience on both the client coverage and financing side, as well as execution know-how in complex leveraged loan and high-yield bond capital structures. Stephen Long has joined the team full time to cover the ratings agencies for leveraged and situational finance, and is targeting new financing opportunities and providing structuring advice.
There are also two new vice presidents. Nigel Walder has moved from London to help migrate European innovations in mezzanine financing to Asia and will lead a team on origination and executions, and provide high-yield and mezzanine capital market guidance. Ann Chuang joins from Barclays, where she spent the past 12 years originating and executing loans. She will work in the role of loan syndicate, assisting and reporting to Sonia Li, who heads loan syndications for the leveraged finance team.
Li-Meng Lee is also re-joining the team after a brief hiatus and will be based in Singapore to help develop new client relationships in Southeast Asia.
The new hires are part of a concerted effort by JPMorgan to build its syndicate and leveraged finance team, which the bank restructured in August 2006, bringing Tim Donahue from New York to co-head the group alongside Eric Mason, who was previously the sole head of the leveraged finance team. Mason focuses on leveraged lending while Donahue works on the high-yield capital markets side.
The Asian leveraged market has evolved rapidly during the past 18 months, according to Donahue, who notes three broad trends: the growth of financial sponsor M&A, the convergence of products and the need to distribute globally.
"It's a cross-border market today," he says. "More and more deals are getting distribution into Europe and the US because if you can distribute into a bigger client pool, as well as to long-term holders, you're going to get a better price. To do that you need to be in touch with your team globally."
As deals become more global, the teams putting them together are increasingly expecting to be able to use the same structures around the world. Covenant-light deals are the leading edge of this trend.
With huge global liquidity in the market borrowers are finding it easier to negotiate deals with fewer restrictions. Traditional structures involved a host of covenants that acted as an early-warning system against defaults, but some of today's deals feature just a single covenant or, in some cases, none at all.
"Borrowers obviously want to get away from covenant structures that can more easily lead to default," says Mason.
At the same time, competition for deals is fierce and acquisition prices are on the rise. The Taiwan cable market has attracted some of the hottest deals in the region. Macquarie paid Carlyle 9.4 times Ebitda for Taiwan Broadband in January 2006. A few months later, Carlyle paid 9.2 times Ebitda for Eastern Multimedia and in October MBK Partners paid more than 10 times Ebitda for China Network Systems.
"Deals and capital structures are getting much more complicated รป we have had to adapt, accommodate and price risk across the capital structure," says Mason. "We are currently witnessing a situation where there's greater leverage, lower pricing, longer tenors and fewer covenants."
And the wobble in the equity markets, says Donahue, won't be enough to knock this momentum. "The bears have been waiting to come out for a long time," he says. "But there's way too much liquidity chasing what hasn't been a great deal of issuance."
