The bank took a strategic decision in 2016 to overhaul its operations, hiring Simon Jones and Bilal Husain from Deutsche Bank, to run origination and syndicate, and Citi’s Mehdi Kashani to run trading — and fitting them into to an overhauled asset finance and securitization (AFS) division, spanning a broad range of the bank’s activities. 2020 saw the turnaround reach full fruition, as its CLO franchise reached top tier status.
The turnaround took BNPP from being predominantly a lender, leading auto ABS takeouts from its conduit vehicles, towards being a fully pledged serious player in securitization, active in all the major markets, with money out the door to the sponsors, hedge funds and specialist lenders that increasingly dominate the market.
More hiring, more lending and more trading balance sheet followed, reforming BNPP from a sleepy commercial securitization bank into a primary markets powerhouse with a commanding league table position — and an increasingly powerful presence in the secondary markets, especially higher up in the capital structure.
A quick look at this year’s deals confirms the picture — 15 RMBS issues, four auto deals, nine CLOs, new issues across eight jurisdictions. Banks which pride themselves on doing niche complex asset deals sometimes look down their nose at institutions active in executing flow deals, but BNPP can and does do both. Captive auto issuers can count on BNPP to extract the last basis point on a blisteringly tight senior tranche, while the bank is also trusted to execute transformative, business-critical deals which lean heavily on bespoke equity placement.
A strong balance sheet and a decent credit rating also supports a strong securitized derivatives franchise, a fact recognised by voters in GlobalCapital’s polled awards this year. While many banks have chosen to exit the business entirely, or to offer only the most vanilla caps, BNPP has stood firm, continuing to offer bespoke balance guaranteed swaps, perfect asset swaps on loans, and other complex products. The bank hedged 18 public transactions last year, an appreciable proportion of the whole market, including several deals for the principal finance arms of some of its competitors.
The Covid crisis has tested all institutions. But in the middle of the pandemic, some banks stuck by their clients, while others pulled back.
BNPP decided to stick in there — a fact well documented in its corporate lending business, Europe’s largest, which zigged when others zagged, and leant into the rush for liquidity among many corporate treasurers. That also extended to securitization. The AFS franchise had a mandate from the highest levels of the bank to stick by clients and ensure they had the liquidity they needed.
As in all institutions, some facilities had to be revised, revamped, waivers granted, terms extended, and margins hiked — but BNPP showed it had ‘diamond hands’ when it counted.
Importantly, 2020 also marked the year when BNPP’s growing CLO franchise reached full fruition. Dushy Puvan, who runs CLO origination, had been with the firm since 2014, slowly growing the franchise, while BNPP added Charles Hatton as a dedicated CLO syndicate banker in 2018.
The French bank slowly climbed the league tables in the years from 2016 onwards, but vaulted into second place in 2020. It even signed new warehouse lines during March, a period when the bottom seemed to drop out of CLO equity and mezzanine markets, in a sign of confidence in the business.
When the market tentatively returned, in April, BNPP was in the lead, pricing Zinnia Finance for Redding Ridge, one of three comeback issues priced at the end of that month. Building a strong CLO business is no mean feat. It’s a complex and integrated business that needs to plug into a decent leveraged finance franchise, quality loan trading desk, and bring top tier structured credit distribution and trading to the table, too.
This year BNPP has also broadened its footprint into other new territories. Non-performing loans are a crucial part of the European securitization market, and a business which some banks have refined into a speciality. BNPP isn’t yet a dominant player, but 2020 brought its first financing and arranging mandates, and there should be more action ahead.
What’s more, BNPP has been active in securitizing and financing legacy performing assets for years, an important business for any serious securitization bank, and one which has deepened its relationships with the sponsors and hedge funds who also drive the NPL market.
Considering all of this, and more, it’s time to recognise the huge strides BNPP has made and cement its place at the top table of European securitization by dubbing it GlobalCapital’s Securitization Bank of the Year.
