2012Warburg Puts Leveraged Finance On Front Line With Hiring Spree
By Pallavi Gogoi
Published in The Wall Street Journal
March 28, 2000
New York - At a time when the junk-bond market is going through a tough spell, Warburg Dillon Read's junk department is on a hiring spree.
What gives?
The answer could lie in 14-year industry veteran Art Penn, Warburg's new global co-chief of leveraged finance.
Mr. Penn, 36 years old, has parlayed his experience in corporate finance, his appetite for risk taking and a lucky streak to improve Warburg's standing in the business of leveraged finance, which includes junk -- or "high yield"-bonds. Warburg is the investment-banking arm of Swiss bank UBS AG.
Since October, when Mr. Penn came on board, Warburg has hired 17 people into its leveraged-finance area. Among those lured is Chris Ryan, Lehman Brothers Holdings Inc.'s former head of loan-syndication and trading, along with nearly the entire bank-debt department at Lehman.
The hiring binge comes at a time when the U.S. high-yield market is suffering from a severe shortfall of cash among investors, uncertain interest rates and climbing default rates.
Marshall Sonenshine, co-chairman at private-equity firm Sonenshine Pastor & Co., says: "Leveraged finance is about doing acquisitions through debt, covering sponsors in the private equity universe, [leveraged buyouts], navigating through bank syndication and high yield, and Art knows those markets."
Warburg certainly isn't a junk-bond power yet, but the firm is moving forward. So far this year, Warburg has moved up to eighth place in lead underwritings of U.S. junk deals, overtaking ninth-ranked Deutsche Bank AG's Deutsche Banc Alex. Brown. And in Europe, Warburg is now ranked sixth in junk deals, again ahead of Deutsche Banc at No. 9, according to Thomson Financial Securities Data.
Warburg is staffing up in diverse areas, from plain vanilla high-yield to bank debt, mezzanine financing, leveraged-buyout sponsorship and advisory roles for mergers.
Warburg's expansion in all areas of leveraged finance was evident in its role during February's $1 billion takeover of United Kingdom conglomerate Wassall PLC by leveraged buyout shop Kohlberg Kravis Roberts & Co. of New York. Warburg was an adviser in the initial stages and, when the time for financing came, was part underwriter of the debt facility.
Mr. Penn cut his teeth on the busy desks of 1980s junk-bond powerhouse Drexel Burnham Lambert. He attributes his wide net of connections -- crucial in his current job -- to the aftermath of Drexel's 1990 bankruptcy. Mr. Penn says the "Drexel blowup was the greatest networking opportunity of a lifetime," as colleagues dispersed to LBO sponsors and corporations all over the financial community.
In 1994, Mr. Penn started the junk department at then-named BT Alex. Brown, which was a part of Bankers Trust. But when Deutsche Bank acquired Bankers Trust last year, there was a clash between the Deutsche and BT Alex. Brown cultures, and Mr. Penn- -- who was global head of capital markets -- wasn't offered a job in the new set-up, Deutsche Banc Alex. Brown.