Help Wanted: Junk Pros Willing To Relocate
January 3, 2000
With the U.S. high yield market stagnant and all growth trends pointing to Europe, top investment banks are courting anyone on the street.
The market downturn that cut off U.S. junk bond issuance in the fall of 1998 basically knocked the fledgling European market out cold. So banks that had begun staffing up in Europe earlier that year froze their hiring strategies and in some cases were rumored to have relocated employees back to the U.S. But starting in the first quarter of this year, the European market jumped back to life. By mid-1999, it had become apparent that the growth in Europe appeared to be long-term and strong, while back in the States, deals were being postponed left and right.
"People are looking at a dramatically vibrant market and are rushing reinforcements to their desks," said one head of European high yield.
Among the shops reported to be beefing up their European high yield groups are Deutsche Bank AG, Chase, Credit Suisse First Boston, Merrill Lynch & Co., and Bear, Stearns & Co. Warburg Dillon Read, having recently nabbed former BT Alex. Brown high yield head Art Penn to lead its junk group, also is in the process of assembling a worldwide junk operation.
The fact that firms like Morgan Stanley Dean Witter, Goldman, Sachs & Co., and Donaldson Lufkin & Jenrette already have made substantial inroads in Europe is prompting rivals to take their operations to a more sophisticated level. But the bar is rising quickly. One source described the elaborate two-and-a-half week roadshow that Goldman and DLJ put on to sell an inaugural $1.5 billion deal from United Pan-Europe Communications this year as an indication of the depth of service U.S. players need to bring to the table to succeed in Europe.
"This is really the first year that the European market has developed with real accounts," one banker said.
Faced with that kind of competition, some market players are expecting nearly every bank with a stake in European high yield to kick off huge staffing campaigns after the holidays. And with so many banks on hiring binges, junk veterans are having a field day.
For example, one head of international high yield said he recently met with a potential hire who had jumped ship from another bank less than a month earlier. Yet, the employee was willing to meet with him and consider undertaking a second move in two months for the right price.
"It's definitely a market where mobility is the name of the game," the official said. Sources said that the hiring is happening across the board, from managing directors to traders, and that employees with expertise in telecommunications are considered the most valuable catches.
Further, bankers said they may have to come up with serious paydays to land junk veterans, especially top management.
"People with European expertise will get bid up," said the head of European high yield at a bulge-bracket firm that is now seeking junk employees. "You can expect to see an increase in comps."
The employee hunt likely will be concentrated in New York, as the relative youth of the European junk market means that European bankers with high yield experience are few and costly. At a junk conference in November, Anton Simon, managing director at London-based New Flag Asset Management, reportedly said that there are perhaps 25 to 30 people in Europe with three years of high yield experience.
Because of that situation, some of the hiring and relocating of U.S. employees may be for educational purposes.
"Many Americans are being shipped over to train Europeans," one banker said. That's because European issuers and investors tend to be more comfortable with European bankers, he added.
But while some New York players could be headed back home at some point, others look ready to stay. Most new hires will be based in London, where most of the burgeoning Euro junk market is being forged.