Monday, 27 June 2011

Rothschild, the investment bank, takes a bigger role in the European debt market

The bank is positioning itself for a major push into the collateralised loan obligation market, which has begun to show signs of recovery following its collapse during the credit crisis.

CLOs are a form of derivative product in which managers package different types of leveraged loans and sell them on to investors.

The market suffered significant losses in the financial crisis, following a significant boom in the heady days of the leveraged buy-out boom in the middle of the last decade, but has since begun to recover.

The bank has established Rothschild Credit Management as a new division, to be spearheaded by Philip Yeates, head of the bank's leveraged finance business. The new arm will focus on buying up management contracts for European CLOs. It is understood Rothschild already has approximately £700m of European leveraged funds, having been active in the area since 2004.

One City source noted that this was a business area Rothschild has been in for some time, but that the bank is now looking at ways of expanding its book. However, the new push is intended as a speculative movement in order to be ahead of the pack in this area, with Rothschild looking to take on new and existing management contracts for assets, as well as hiring staff from rival banks.

It is believed the move will not require major strains on the bank's balance sheet.

A Rothschild spokesman declined to comment.

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