NEW YORK - Barclays PLC (BCS) has climbed to the top of the asset-backed securities market, thanks to an aggressive rebuilding effort and a surge in investor interest in bonds secured by automobile loans and unusual assets such as revenue from pizza franchises.
Barclays has been lead structuring bank on 13 offerings in 2012, including this month's $1.6 billion deal backed by Domino's Pizza Inc.'s (DPZ) franchise revenue. They are part of the 20 deals the firm has led so far this year, topping Dealogic's ranking of ABS underwriters.
Now, Barclays has to sustain that momentum as its investment-banking operations feel pressure to deliver on lofty competitive goals set by the bank's top management and while competitors try to gain share.
"Barclays is going to feel the heat," said Jim Harrington, an asset-backed-securities market consultant.
Asset-backed-bond deals are off to a strong pace this year, with $39 billion issued so far--the most in any first quarter since early 2008, although well below precrisis levels, according to Dealogic. Auto-backed bonds, which make up a category Barclays leads, have raised $17 billion, the most in any first quarter since 2005.
"The growth in our market so far this year speaks directly to the improving economy and renewed consumer confidence," said Brian Wiele, the head of Barclays's securitization syndicate in the Americas. "If we continue along the first quarter's trajectory, we expect it to be a very busy year."
Any stumbles in the economic recovery or consumer confidence could blunt those expectations just a year after the unit was thrown into disarray by the abrupt departure of 15 consumer-origination bankers to Credit Suisse Group AG (CS).
Barclays ranked third in 2010 but slipped to fifth last year among top securitization bookrunners, behind Bank of America Corp. (BAC), Citigroup Inc. (C), J.P. Morgan Chase & Co. (JPM) and Royal Bank of Scotland Group PLC (RBS), according to Dealogic.
The group that left for Credit Suisse included bankers who managed clients in automobile- and mortgage-backed bonds. Following their departure, Diane Rinnovatore became cohead of the securitized-products-origination group, joining Cory Wishengrad in that role. Rinnovatore was a consumer- and mortgage-securitization banker at Lehman before she moved elsewhere at Barclays's investment bank after Barclays took Lehman over in 2008.
The duo hurried to restaff. In two days, they lured fellow Lehman and Barclays alum Marty Attea back from Morgan Stanley (MS), where he went in 2009. In subsequent months, Barclays added a wave of vice-president-level bankers, including Jonathan Wu from J.P. Morgan and Eric Chang from Bank of America. In July, it hired Citadel's Greg Boester as a managing director focused on mortgage bonds.
Wishengrad, Rinnovatore and Wiele reached out to clients to reassure them and get tips on prospective hires. The new group had to dive into several deals in full swing, including a series of bonds that helped the National Credit Union Administration rid itself of $50 billion in illiquid assets it acquired in the takeover of five credit unions.
"We needed to rebuild and execute on the deals in the pipeline," Rinnovatore said in a recent interview.
By Labor Day--when ABS deals started up again--"not only were we operating at full capacity, but we were also winning an outsized share of the business," Wishengrad said. Deals included a $550 million bond sale for Miramax Film NY LLC, backed by licensing and distribution revenue of films in its library.
In January, the firm did its first ABS transaction for Spanish bank Banco Santander SA (STD), with a $1 billion bond backed by Santander's subprime-auto-loan contracts.
This month's Domino's deal was slated for last summer, but market turmoil forced its delay. The pizza company picked Barclays to run the deal because the firm had a track record of bringing such unusual deals to market, including a similar bond for Church's Chicken last year and a much earlier one for DineEquity Inc. (DIN) in 2007, according to Domino's Chief Financial Officer Michael Lawton.
Though Domino's talked to other banks about the deal, the inner turmoil at Barclays didn't change anything, Lawton said. "We didn't see a good reason to switch" banks, he said.
