Tim Donahue to rejoin J.P. Morgan in the US

The high-yield and leveraged-finance banker returns to the sell-side after GSO Capital pulls the plug on the Asia business he was meant to spearhead.

Timothy Donahue is about to rejoin his old firm J.P. Morgan in a senior role on the loan and high-yield capital markets desk in the US -- an area where the bank, as one of the key survivors of the financial crisis, is currently boasting a dominating market share, sources familiar with the situation say.

Donahue will return to the US after about three years in Asia and, according to the sources, he will leave the region as soon as the end of this week to take up his new job, which will see him rejoin the same team that he left in April 2006 to come out here. He will assume the title of managing director for loan and high-yield capital markets in North America.

Donahue was head of Asia-Pacific leveraged finance when he left J.P. Morgan in May last year to join GSO Capital Partners in Hong Kong. GSO is an alternative asset manager that was taken over by Blackstone Group in early 2008 and which specialises in leveraged finance and other types of credit such as mezzanine debt. Donahue was hired to build a team that was to focus primarily on various credit investment opportunities, such as distressed debt and the provision of buyout funding across Asia, Japan and Australia.

However, the timing of GSO's expansion into Asia couldn't have been much worse, with Donahue joining (after a three-month gardening leave) just two weeks before Lehman Brothers went bankrupt. Soon the credit crunch made it difficult for both companies and investors to obtain funding, and instead of the multitude of opportunities that was envisaged for GSO's credit-focused fund, the new business faced a market that was quickly deteriorating.

In January this year GSO decided to pull the plug on the Asian business, which hadn't yet made any investments, and by the end of April, Donahue and the other three team members were all back in the market looking for new jobs. GSO continues to operate in the US.

Donahue had initially indicated that he would prefer to stay in Asia for another two or three years and one source said he had an investment banking job lined up in this region when J.P. Morgan approached him a short while ago. But the opportunity to rejoin a familiar team and a business that is currently booming appears to have been too tempting to pass on -- in any case, Donahue is currently said to be packing for an earlier-than-planned return to the home country for him and his family.

Donahue played a big role in J.P. Morgan's climb to second place in the Asia ex-Japan league tables for G3 high-yield bonds in 2007 and until his departure in May 2008 from fourth in 2006. His first job in Asia was as co-head of the syndicated and leveraged finance team together with Eric Mason, and when Mason left the firm in April 2007, Donahue took over as sole head. He joined J.P. Morgan's high-yield group in New York in 1999 after two years as a corporate securities attorney in the same city.

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