Citi halves European leveraged loan team

The global bank has cut half the members of its 27-strong team. Deal fees from private equity have collapsed on the back of the credit crunch, as banks have pulled back from larger buyout deals.

Global bank Citi has slashed its European leveraged finance team by half, according to a source close to the bank.

The bank has made redundant seven of the 27 people in its leveraged finance team, as well as reassigning another seven to other parts of the bank. Citi declined to comment.

The source said those who had been let go were junior-ranking employees, the middle-ranking hires have been found roles elsewhere in the bank.

Citi’s leveraged finance team provided the entire funding for one of the most controversial buyout deals of the last year, Terra Firma’s ambitious €5.4 billion ($8.5 billion) take-private of music group EMI. This is believed by many members of the buyout community to be a potentially problematic deal. Sources close to EMI say, despite this, that the turnaround is financially ahead of schedule.

Banks have been unable to syndicate deals like EMI, which were financed on generous terms at the height of the liquidity boom in the global credit markets.

The bank’s former chief executive Chuck Prince was a keen advocate of leveraged finance, telling UK newspaper Financial Times in late July banks had to continue providing finance for large buyouts. “When the music stops in terms of liquidity things will be complicated. But as long as the music is playing you’ve got to get up and dance. We’re still dancing,” he said.

The bank, like all of its competitors, has subsequently pulled back from providing leveraged finance, the source said. The amount of banking fees provided by buyout firms was down 77 percent in the first quarter to $1.16 billion (€742 million), according to data provider Dealogic.

There have been a string of high profile departures from other investment banks to join private equity firms.

This week JP Morgan’s head of financial sponsor coverage John Coyle has this week left the bank to head European buyout firm Permira’s US business. Last week Morgan Stanley’s co-global head of media and communications Andrew Tisdale joined Providence Equity Partners as a managing director in its London office.

Additional reporting by Andy Thomson.