With the addition of a pair of industry veterans, Houlihan Lokey has set its sights on the record-setting loan syndication market.
The Los Angeles-based investment bank has hired two managing directors, previously of Antares and GE Capital, to staff its newly formed HL Finance – a syndicated leveraged finance platform that will arrange transactions for upper mid-market companies. The new platform will set up deals for issuers who produce at least $50 million in EBITDA and whose capital needs are more than $250 million.
To help underwrite those commitments, Houlihan Lokey joined forces with HPS Investment Partners, which will help HL Finance underwrite loans of up to $1 billion, according to a statement released by the investment bank.
The new group will focus on arranging senior secured leveraged loans for sponsor-backed, privately-held and public corporate entities.
The partnership hopes to penetrate a syndication market that financed 1,270 new issue transactions valued at $650 billion last year, according to Leveraged Commentary and Data – an offering of S&P Global Market Intelligence. “When you include all outstanding syndicated loans, we have the market at $1 trillion through the first half of 2018,” said S&P director Marina Lukatsky.
Investment banks are on pace to earn a record $13.16 billion in leveraged syndication fees and $2.94 billion in investment grade fees this year, according to Jeff Nassof from Freeman Consulting Services.
“Houlihan’s announcement is part of the greater trend of big, regulated banks losing market share to smaller firms,” Nassof said. “Cowen and Piper Jaffray have both announced similar ventures in the last few years. It’s akin to how banks ceded mid-market share to BDCs and direct lending funds in this last cycle, and permanently it seems.”
The group will be staffed by Matthew Lyness and Ed Ribaudo, whom the investment bank hired this past year in anticipation of the syndication business debut. Both are structuring and syndication specialists formerly from GE Capital.
Lyness worked at Antares for nearly two years as head of the NY structuring team, and at GE Capital Markets for nearly eight prior to that. Before GE, he notched more than ten years of syndication experience at JPMorgan, Maryland National Bank and Barclays. For his part, Ribaudo worked at GE Capital for nearly 12 years, and prior to that, at Scotia Bank and Key Bank, according to his LinkedIn profile.
The co-heads of Houlihan Lokey’s capital markets groups – Gregg Newman, Anthony Martino and Chris Dunlop – will lead the syndication group. One or two more hires for HL Finance are reportedly in the works. “The syndication program is a natural and incremental extension of our business,” Newman told Private Debt Investor. “We see a significant opportunity for the firm over the near and medium term.”
Last year, Houlihan Lokey’s 35 professionals from the capital markets group produced 40 transactions worth a total of $12.5 billion in fresh capital for clients. “The syndication effort is integrated into our broader capital markets group, and we will add staff to the platform as the business grows,” Newman added.