Mark Lewellen has been busy making sure Barclays’ debt capital markets team for Europe, the Middle East and Africa retains its focus, despite reorganisation to bring investment-grade and emerging market financing and risk management under one umbrella. 

Mark Lewellen has come a long way in the past 14 years. In that time he has gone from associate director of Barclays’ debt capital markets (DCM) team in Europe, the Middle East and Africa (EMEA) to co-heading the bank’s EMEA DCM and risk solutions. He has witnessed the changing landscape in the investment banking world and Barclays’ adaptation to it, while running one of the market’s leading DCM franchises.

“When I joined Barclays Capital in 2000, the strategy was focused on becoming the leading provider of financing and risk management for our clients,” says Mr Lewellen. “The big game-changer for us was the acquisition of the Lehman North American business, which as well as a far stronger US fixed-income platform, also brought in other full-service investment banking business lines. My focus at the time was integrating our existing EMEA debt capital market business with a rapidly evolving banking franchise, which now included mergers and acquisitions [M&A] advisory and equities. It was fast moving and a real highlight for me.”

Growing portfolio

Mr Lewellen’s background at the bank is in corporate DCM EMEA, which he headed for four years. In this role, he initially oversaw the bond business, before the bank’s loan business was added to his remit in 2012.

Appointed head of DCM EMEA in 2013, Mr Lewellen saw another adaptation to his area of competencies to include risk management after Barclays’ new chief executive of the investment bank, Thomas King, made changes to investment banking operations in 2014.

“We expanded our debt origination business about two years ago when we amalgamated our bond and loan coverage and execution teams into a combined DCM group,” says Mr Lewellen. “We recognised that the synergies for areas such as acquisition finance were so strong that it was much better to have an aligned team and the benefits were immediate.”

“A few months ago we made a follow-on decision to merge the DCM team with our risk solution group, who are responsible for derivative coverage,” he says. “Now we have all our investment-grade and emerging market financing and risk management sitting under one organisational structure. This makes absolute sense both in terms of coverage and linkage with other parts of the bank.”

A strategic decision

Rewind to May 2013, when Mr King initially became co-chief executive of corporate and investment banking, not long after it was decided that the overriding strategic performance objective was to achieve return on equity (ROE) above the cost of equity. With an update to this strategy in light of changes in the regulatory environment for banks, Mr King was appointed chief executive of the investment bank in May 2014.

The announcement from May 8 separated out non-strategic businesses to reduce the equity part of the ROE calculation and moved corporate banking, previously part of the investment banking operations, into the retail bank.

The investment bank strategy review called for more permanent and strategic profit generation by means of integrating banking, equities and credit; a reduced capital allocation to the foreign exchange and rates business; a centralised use of the balance sheet through lowering costs, including a reduction in headcount; and strategic re-investments.

For DCM that meant more integration and co-operation between all parts of its operation.

“The linkage between origination, the syndicate desk, the market side of the business, trading and distribution – this was enhanced even further,” says Mr Lewellen. “We are tooling our bankers to be much more cross-product. We want them to get further into the mindset of our clients and be problem solvers. We don’t think you achieve this well if you are organised in silos.

“A [chief financial officer] and a treasurer, they don’t just think about bonds, hedging or loans, they think about what is the optimal way to finance and mitigate inherent risks in their business,” he says. “And by having all these products under one umbrella it means our thinking is much more aligned with the clients we cover.”

2014’s signature transaction

The origination-focused, cross-product approach is best exemplified in one of Barclays’ signature deals of 2014: the takeover by UK broadcaster BSkyB of sister companies Sky Italia and Sky Deutschland.

“BSkyB is a transaction that we are very proud of and it was a good example of how we support our clients,” says Mr Lewellen. “It was classic M&A financing using an appropriate mix of debt and equity.”

Barclays acted as joint underwriter, bookrunner, mandated lead arranger and facility agent to BSkyB, which in the process changed its name to Sky.

The acquisition financing included about £5.6bn ($8.5bn) of fully committed bridge and term loans, most of which were subsequently refinanced through bond issues in euros, dollars and sterling. The financing came alongside a £1bn revolving credit facility, as well as a £1.4bn equity placing, and Barclays also advised on hedging strategies.

“Financing a transaction of this scale and complexity relies heavily on having a strong dialogue with rating agencies, law firms, syndicate banks and institutional investors, so it was fantastic to see it be such a resounding success,” says Mr Lewellen.

He adds that Barclays has a long-term relationship with Sky as a bookrunner on all of the company’s bonds over the past 10 years and also became Sky’s corporate broker in 2012 – a platform that was started in 2010.

Climbing the league tables

It is too early to judge if Barclays’ recent changes to its investment bank have made an impact on the bank’s DCM performance. Still, in 2014, Barclays worked on $361.1bn of global DCM transactions and had a market share of 5.7%, according to Dealogic, up one position compared with 2013 and second only to JPMorgan.

In Europe, Barclays’ DCM business had a 6.5% share in 2014, behind Deutsche Bank and HSBC with shares of 7.4% and 6.6%, which was another improvement from 2013’s fourth spot and 5.9% market share. Barclays arranged $145.8bn of deals in Europe, of which $27.5bn were corporate bonds and $51.9bn financial institutions group (FIG) issuance.

“In terms of our clients and our mix of business, we have not made any great changes [since the strategy update],” says Mr Lewellen. “We have started the year very focused and in the eyes of clients nothing has changed in terms of our core product offering and we remain very focused.”

The bank performed well in the corporate hybrid capital space and in transactions for sovereigns, supranationals and agencies (SSAs) – including deals for peripheral issuers such as July’s $4.5bn 10-year bond sold for Portugal and transactions for SSAs out of Africa, supported by the Barclays Africa Group.

Financials are the future

In European FIG issuance, both including and excluding secured bonds, Barclays is in second spot with a market share of more than 6%. This represents a jump from 2013’s 4.7% share and rank in seventh position, when excluding secured issuance, and 5.1% and fourth position when included.

“We have had a very strong run in financial institution DCM this year and with all the developments around regulatory reforms it is going to be an area of enormous ongoing focus for our FIG group,” says Mr Lewellen.

Total loss-absorbency capacity, or TLAC, is one area of focus. TLAC requirements were introduced in a consultative document by the Financial Stability Board in November last year, requiring global systemically important banks to hold a minimum amount of loss-absorbing capacity. It means that in the case of a failure of a systemically important institution, this capacity should allow for critical functions to continue without requiring taxpayer support or threatening financial stability.

“It’s going to be interesting to see how different institutions approach the regulatory changes,” says Mr Lewellen. “[TLAC] raises the prospect of additional funding requirements and, for some, potential issuance out of holding company structures. It may also be the catalyst for liability management and debt restructurings, although the lead time to implementation in 2019 suggests a natural recycling of senior unsecured debt into new TLAC-eligible bonds over the coming years.”

In 2015, Mr Lewellen expects bank and insurance capital issuance, as well as SSA and acquisition-related financings to again drive a strong performance for Barclays in DCM.

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