September 18, 2012 / 1:25 PM / 6 years ago

Alcentra beefs up global leveraged finance fund

LONDON, Sept 18 (IFR) - Alcentra has joined a spate of asset-managers merging their leveraged loan and high-yield bond franchises as it seeks to take advantage of the growing convergence in global leveraged finance markets.

Alcentra, which is 97.2% owned by BNY Mellon and 2.8% owned by employees, said on Tuesday that Standish Mellon Asset Management’s high-yield bond team would become part of Alcentra effective from January 1 2013.

The change will increase Alcentra’s assets under management to USD23bn across its U.S. and European businesses from USD15.2bn.

“Over the last 18 months there has been a convergence between the leveraged loan and high-yield bond markets, with many issuers looking at both asset classes simultaneously to sound out where they can get the best pricing and execution,” said David Forbes-Nixon, chairman and chief executive of Alcentra.

“Some of our clients have been asking for a mixed global mandate across both leveraged loans and bonds, and this change mirrors how the street has started to organise its leveraged finance platforms.”

A number of companies have taken a broad approach to funding opportunities this year.

Chemicals company Ineos originally planned to price USD2.2bn-equivalent of dual-currency senior secured bonds in April, but decided to treble the size of its dollar-denominated covenant-lite loan instead due to more favourable pricing.


Alcentra said its U.S. based team would more than double to 15 from eight sub-investment grade investment professionals. Paul Hatfield, Chief Investment Officer, will relocate to New York as president and head of Alcentra’s U.S. operations. Hatfield will continue to report to Forbes-Nixon.

Andrew Wilmont will manage the European high-yield business at Alcentra. Wilmont joins on November 1 from AXA Investment Management, where he worked for the past seven years, most recently as head of European high yield.

“This is a transformational deal for Alcentra, as we can look at the market across all sub-investment-grade products from a truly global perspective,” added Forbes-Nixon.

“Our specialised area is credit, and whether that is in loans or bonds, we still have to do the same fundamental credit research.”

European investment firms ECM Asset Management and Intermediate Capital Group have also recently created new funds to incorporate both European leveraged loans and high-yield bonds. On a global scale, Babson Capital said last week that it had raised over USD1.2bn for its global loan fund.

Alcentra’s Forbes-Nixon said having a global mandate gave the firm an edge, adding that it was vital to have a presence in the U.S. high-yield bond market which is roughly half the overall size of the USD2 trillion global leveraged finance market.

European issuers from across the sub-investment grade rating scale have accessed the deeper and more liquid U.S. high-yield bond market this year.

Some, such as Spanish cable company ONO, have done so because European markets have been less receptive to peripheral borrowers, while others, like business travel operator Carlson Wagonlit, have issued both euro- and dollar-denominated bonds simultaneously to help create price tension.

Others that have dollar revenues, such as German tyre maker Continental and Irish-listed packaging firm Smurfit Kappa, have benefited from marginally lower borrowing costs in the U.S. bond market versus in Europe.

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