In a sign of how high expectations for the European high-yield market have become, Barclays Capital has turned its attention homeward, away from the U.S. market where it learned the product.
The investment banking arm of Britain's second-biggest bank said Friday that it has transferred its global head of high yield, Joseph Bencivenga, to its London headquarters from New York, where it developed its worldwide junk bond business during the last three years.
It also said it would hire about 70 people in leveraged finance in the next two years. About two-thirds of these hirings would probably be in the United Kingdom and Continental Europe, it said.
"The bank started its high-yield business because it recognized that high-yield bonds would be a key financing instrument for European corporations. And because it was a U.S. product, the logical place to start was in the United States," said John Kelting, a director and head of U.K. financial sponsor coverage.
But things have changed since the bank entered the junk bond market.
Last year, European corporations issued more than $17 billion of high-yield bonds, more than double the volume in 1997, according to Chase Securities.
One challenge is to increase the issuance by corporations outside the media and telecommunications industries, which accounted for almost three-quarters of all European junk bond issues last year, according to Chase.
"At this point corporations are usually still constrained by shareholders that are uncomfortable with leveraging the balance sheet," Mr. Kelting said, "so a vast majority of issuance continues to be in media and telecom."
The bank is also intent on improving its position in U.S. acquisition finance - the fast-growing private equity market that is a big user of both bond and bank debt.
Barclays failed to make the list of the top 25 U.S. junk bond underwriters last year. But it could have better luck at increasing market share in the still-young European junk bond market, where it has a long history as a corporate lender. Last year it was the No. 1 lead manager of leveraged loans in Europe and the 10th-biggest junk bond underwriter, according to Thomson Financial Securities Data.
"The pecking order is not as well established in Europe as it is here," said David Kelson, an analyst at Fitch IBCA.