Loan House of the Year – BNP Paribas
BNP Paribas had an extraordinary 2020. While the bank tends to lead the loans league tables, it easily outperformed its rivals last year, notching up a double-digit market share, and led on issues central to the future of the market, such as sustainability-linked loans and risk free rate replacements.
“If you’re leading and doing more deals than anybody else, you have the best insights into the market, and that allows you to provide optimal advice to clients and best execution.”
“We strive to show leadership in investment grade loans, in leveraged loans, in asset finance and in corporate M&A financing, and to demonstrate that to clients,” says Charlotte Conlan, EMEA head of loan syndicate and deputy head of leveraged finance capital markets.
It was leadership that BNP Paribas showed in the speed with which it reacted to the Covid crisis in March last year. Indeed, while others paused, the bank made an immediate decision that clients needed its support. It was a brave call given genuine concerns about distributing risk at that time, but BNP Paribas still made its move, bringing to bear its market knowledge built up over the years.
“Sometimes you can debate the riskiness of underwriting syndicated corporate loans but at that point of time there was a genuine element of risk,” says Nicolas Rabier, co-head of loan capital markets. “When we went out with the first deals some banks were unsure of the ability to lend, some were protecting capital and some were not sure how to price risk because their cost of funding was going up. “
He adds: “We were doing a lot of underwriting and so we had to read the market correctly and make sure we were doing it with strong knowledge of who was available to play and who was not.”
Once the first deals had been done — demonstrating BNP Paribas was confident to underwrite and place them — the calls really began to come in, says Rabier.
“It became client after client after client and on the investment grade side of the business we saw as much business in three months as we usually see in a year. Top management at the bank made it very clear to us that BNP Paribas was here to support clients and not to blink.”
Private equity firms in the leveraged loan market were at the time focused on retaining liquidity in their portfolio companies, rather than doing new deals, and BNP Paribas was involved in supporting its clients there with liquidity. But as the pandemic eased during the summer, the bank took the lead in reopening the market with a €2.2bn term loan ‘B’ backing the acquisition in June of Spanish telecoms firm MasMovil by Cinven, KKR and Providence Equity Partners.
“Understanding underwriting risk at that moment in time and being prepared to take it requires an excellent market read, confidence in your knowledge of the credit and the ability to sell the story to the market,” says Conlan. “It effectively showed that you could underwrite leveraged loans again — the market came back and it didn’t really stop again for the rest of the year.”
BNP Paribas’ leadership has also been on display as the loan market slowly moves towards adoption of risk free rates. The bank was the lead last October for the first syndicated loan to use a risk free rate from day one, a £2.5bn three year loan for Tesco.
The Tesco transaction was also notable for being in sustainability-linked format. The ESG product has fast gained traction in the investment grade loans space and is now moving to the leveraged side, says Conlan. “Because we’re a broad business, we’re able to take our know-how, in this case ESG for corporate loans and apply it in the leverage market as we did with MasMovil.
“We can help private equity firms use ESG financing to support their own strategies and equally importantly, deliver ESG-linked paper into our institutional investor client base.”