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24 July 2013
Barclays Capital has never been hot on the lips of securitisation lawyers, but Robert Palache's decision to move there from Nomura will undoubtably change that. In the past 12 months most banks, particularly investment banks, have been a bit sparse on the recruitment front. But not Barclays. No, Barclays has been on a hiring spree.
Everyone said that Barclays was making a mistake when it decided to concentrate on fixed income and sold its equity practice to Credit Suisse First Boston. But now that the debt markets are not just buoyant but in a stronger position than the equity markets, suddenly everybody agrees that Barclays made an informed and strategic decision. The consensus is that the bank is now in a position to take fixed income work to the next level.
A number of high-profile hires in securitisation and research are testament that the bank's chief executive Bob Diamond is keen to invest. He is paying the big bucks and now he expects to see Barclays moving away from mainstream eurobonds further towards structured finance.
Palache says that he turned down a number of offers as global head of securitisation, preferring to take his role as joint head of securitisation at Barclays. Often credited with engineering securitisation in this country, he left Clifford Chance in 1998 because he was bored with being a lawyer. However, the reason for his departure from Nomura remains a mystery, and is made all the more intriguing by the departure of some of Palache's team members and their subsequent wall of silence. If the papers are to be believed, then Guy Hands, who heads the principal finance group, is also leaving Nomura to set up a principal finance investment fund. All the evidence suggests that the bank is pulling out of that market.
But where one door closes another opens. At Barclays, Palache will tap into the bank's existing corporate client list to expand its securitisation practice. At Nomura, he took responsibility for the agency side of principal finance, and at Barclays he will focus on a combination of whole business securitisation and future flow securitisation. For anyone not au fait with the term, this means securitising cash flows that are projections of money expected to be earned in the future. The ratings come down the credit spectrum and will develop through an ABB rating.
Barclays has remained pretty low profile in the securitisation market, but it has done more than it is often given credit for. This year, it was involved in the mortgaged-backed securitisation for Britannic Money, and in 1999 it arranged the securitisation to finance the acquisition of Westminster Healthcare by a Goldman Sachs private equity group.
That said, Palache's arrival will bring increasing amounts of securitisation work Barclays' way, and law firms will undoubtedly be keen to capitalise. Although Palache will have to work within the confines of the Barclays panel, he is likely to bring old relationships with him.
He is still in touch with his old firm Clifford Chance, and in particular John Woodhall - Clifford Chance advised Nomura on the Marne et Champagne deal. He has a close relationship with Julian Tucker at Allen & Overy, who did all the Nomura pub deals and he has also used Freshfields Bruckhaus Deringer, most notably on the Rosy Blue diamond securitisation. Palache mentions other firms, including Dechert, Norton Rose and Sidley Austin Brown & Wood, but Barclays Capital's securitisation panel restricts the bank's instruction to A&O, Clifford Chance, Freshfields, Linklaters & Alliance and Weil Gotshal & Manges. This means that some of Palache's former relationships will be given the chop. Unfortunately for those firms, Barclays' legal review started at the beginning of last year so the situation in unlikely to change fast.
Banks have to watch out for Government proposals to change insolvency laws and abolish administrative receivership. This threatens the future of whole business securitisation, and while Palache may believe that there are ways around the problem, others remain sceptical.
But for the moment, securitisation remains on the up and the firms on Barclays' panel look set to benefit. Now speculation turns to Palache's former co-head at Nomura, Henry Cooke. Does anyone know where he's going?