Seeking to keep up with the investing and issuing habits of the leveraged finance market, CIBC World Markets has combined its U.S. leveraged lending and high-yield bond teams into a single, 160-person group.
In a reorganization announced internally last week by the investment banking business of Canadian Imperial Bank of Commerce, the former heads of the high-yield bond business - Dean Kehler, Andrew Heyer, and Jay Bloom - are now in charge of leveraged finance.
The group includes below-investment-grade lending and fixed-income products.
Buyers and issuers of below-investment-grade debt products have made similar consolidations. They have been tearing down some of the walls between loan and bond debt, and they expect their banks to do the same.
Financial sponsors - firms such as Kohlberg Kravis Roberts and the Blackstone Group - are among the biggest users of high-yield financing because their corporate takeovers are usually leveraged. These firms have been pushing banks to provide one-stop debt financing.
"Most of what financial sponsors do is complex, involves multiple levels of capital raising, and is done under significant time pressure," said Mr. Kehler, a managing director. "The more they can work with someone who can streamline the process, the better off they are."
Last year CIBC was the 12th-largest lender to financial-sponsor-backed companies, leading 35 loans worth $6.4 billion, according to Loan Pricing Corp.
Mr. Kehler said one result of the integration, which has been in the works for several years, should be a larger share of the acquisition finance market.
The move was driven in part by buy-side appetites. Vehicles such as collateralized bonds and collateralized loan obligations have increasingly been switching back and forth between investments in leveraged loans and high-yield bonds.
"CBOs and CLOs are buying both bonds and loans, and they want the firm looking at all aspects of it," said William Phoenix, a managing director who will oversee the lending side of the business with Richard Hassard.
No serious junk bond shop can ignore the investment habits of collateralized debt obligations. These vehicles, which pool insurance and pension fund management funds, invested more than $50 billion in the high-yield market last year, according to Merrill Lynch & Co.
The growth of the market for collateralized debt obligations "has created an important buyer of both bonds and loans," said Brian McManus, a director in high-yield strategy and structured finance at Merrill Lynch.
A unified finance structure is already in place at many of the largest junk bond issuers. The top three high-yield bond underwriters - Donaldson, Lufkin & Jenrette Inc.; Salomon Smith Barney; and Goldman Sachs Group Inc., in that order - all have their junk bond and leveraged loan businesses on the same platforms.
And Bank of America Corp., under the direction of debt-raising chief Thomas Bunn, is trying to bring the two groups closer together.