Comerica Inc. is not a name typically associated with the high-profile world of leveraged finance, but the banking company's plan to start a "financial sponsor" group may soon change that.
Already a fixture at Wall Street firms and at many large commercial banks, financial sponsor groups are teams of bankers that bring prospective deals to leveraged buyout firms like Kohlberg Kravis Roberts & Co. or Forstmann Little & Co.
By the end of the first quarter, Detroit-based Comerica expects to have its own financial sponsor group, said Michael L. Fidler, managing director for corporate finance.
"With the globalization that's taking place in the automotive sector, as well as consolidation in numerous industries, we see a lot of activity" with leveraged buyout firms, Mr. Fidler said.
Exactly where the new group will be housed in the bank has not yet been decided, but it will be staffed with Comerica bankers, Mr. Fidler said. The move is only the latest by the $36 billion-asset company to keep it competitive in the rapidly changing corporate finance marketplace.
For example, Comerica had long been involved in syndicated loans but did not start a dedicated loan syndication and trading operation until the first quarter of 1994.
"Prior to that, certainly we were a lead bank on transactions with long- standing customers," Mr. Fidler said, "but we really didn't have professionals in place whose responsibility it is to run that business until 1994."
When Comerica formed that corporate finance team, most of its 11 members, including Mr. Fidler, came from the company's U.S. corporate banking arm. The planned financial sponsor group will probably come from within too, Mr. Fidler said.
In February 1996, Comerica formed a partnership with SPP Hambro & Co., an international investment banking firm specializing in private placements. The arrangement let Comerica offer SPP Hambro's distribution network for private placements of all types of debt: investment and noninvestment-grade, mezzanine and subordinated, as well as convertible and preferred stock and even 144a junk bonds.
A similar partnering arrangement in November 1996 with State Street Bank and Trust's Clipper Group lets Comerica offer asset securitization programs for trade receivables, consumer receivables, and even auto loans and leases.
Lacking a section 20 subsidiary, it cannot underwrite corporate debt or equity or offer its own private placement services.
But by adding its partners' products and services to Comerica's corporate finance menu, the company has created the one-stop-shopping capability that other commercial banks have either built in-house or bought by acquiring investment banks or securities firms.
The arrangement seems to work for Comerica's corporate customers, most of which are privately held, middle-market firms with annual revenues of $25 million to $250 million.
One example is Comerica's relationship with Dearborn, Mich.-based Plastech Engineered Products Inc., an automotive supplier. "To be able to, in effect, deal with one institution really did make the proposal very attractive," said Randall V. Gaj, Plastech's treasurer.
Comerica is a long-standing lender to Plastech.
"In this day and age, it's not very often that you're the only game in town," Mr. Fidler said. "You need to stay sharp, and you need to have full product capability to allow you to have a one-stop shop."
