Taking a cue from buy-side clients that have been buying leveraged loans and junk bonds on the primary and secondary markets, two investment banks have recently merged their loan sales teams.
RBC Capital Markets has combined its new-issue and secondary market loan sales teams. Bank of America Merrill Lynch also recently merged its secondary market team with its primary institutional loan team.
"We see more and more accounts trading multiple products on one trading desk," said Mike Meyer, head of U.S. credit for RBC Capital Markets. "You're starting to see a lot of clients touching all asset classes just looking for the best relative value. They may like a name and may like a credit and may trade and buy bonds but will see where loans are trading and decide that's the best value."
RBC's combined team consists of 14 salespeople — one based in Los Angeles, the rest in New York — who report to Meyer. Meyer said that the group may grow by one or two hires but is otherwise the right size. The process of combining the teams began about a year ago and was completed in May. Meyer said that the sales group works closely with RBC's loan capital markets group and that the loan sales force also reports to loan capital markets head Miguel Roman.
Buyers investing in both loans and bonds began as early as seven years ago.
"Hedge funds drove it initially," Meyer said. "Non-investment-grade hedge funds were focused on loans as well as high-yield. Now you'll see high-yield mutual funds that buy loans … and see insurance companies [and others] that were once buying just loans now buying bonds."
Bank of America Merrill Lynch combined its secondary market team with the one that targets new institutional term loans. The new group is headed by Douglas Antonacci and Howard Sysler, who are based in New York and report to the co-heads of credit sales Steve Hollender and Gerry Walker.
Like RBC, B of A combined the two groups to give clients a single point of contact for multiple types of loan transactions. Management also sees it as a way to improve coordination between the loan origination and the sales teams, according to an internal memo that the bank confirmed. The primary loan sales team will remain part of B of A's global capital markets group and will be responsible for the remainder of new-issue loans.
Combining groups presents some obstacles.
"It's a different skill set as far as salespeople are concerned," Meyer said. "People who had been focused their entire career on the primary now have to focus on coming to the public side. If there have been growing pains, that's where we've seen them. … This isn't rocket science. We've found that people adjust pretty quickly."
