Market Insights

Scotiabank Global Banking and Markets is firmly planting its flag in structured credit, initially by making its mark in the collateralized loan obligation (CLO) product. The Bank recently established a U.S. structured credit group of industry experts, with deep knowledge in the burgeoning private credit markets, as well as the traditional broadly syndicated loan (BSL) market.

Scotiabank’s U.S. structured credit team has already earned mandates from major private equity and institutional clients, including Blue Owl Capital Corp, Cerberus, Fortress and Guggenheim. They have also achieved considerable trading volumes in both secondary markets for BSL and middle market CLO bonds, with volumes and customer participation increasing each week.

Curating top-notch structured credit team

The formation of Scotiabank’s U.S. structured credit team reflects the Bank’s realization of synergies with their existing BSL Loan TRS business. Scotiabank also sees the opportunity to distinguish itself in the world of private credit. This asset class’s increasing influence on global markets cannot be understated, as the market has been “transformed into a $1.3 trillion private debt universe rivaling both broadly syndicated loans and high yield bonds in size. It is estimated that market value will double to $2.7 trillion by 2027.”1

Michael Kruse, Managing Director and Head, Global Banking and Markets, U.S., points out that Scotiabank’s entry into the market provides a myriad of advantages to issuers and investors: “We’re combining Scotiabank’s traditional strength as a very well-capitalized lender with added capital markets expertise to grow with our clients and expand our product array for them. This was a rare opportunity for us to bring together a highly skilled group of specialists from across Wall Street and create a top-notch client offering.”

To serve this market, in May 2023, Scotiabank assembled a Global Structured Credit team based in New York, led by David Williams and Brad Roberts, Managing Directors and Co-Heads of U.S. Structured Credit and Ed Ra, Head of FICC Structured Products and CLO Warehousing based out of Toronto. The team is composed of seasoned industry specialists who have joined Scotiabank from existing platforms to combine with Scotiabank’s existing FICC Structured Products group to create an all-star team across the globe. The team has distribution in place in Europe, Asia and Latam, in addition to North America. The group quickly ramped up its capacity to originate loan facilities for credit funds, to support their BSL and middle market activities, and offers advice, structuring and capital markets issuance.

According to Brad Roberts, “In a very short period of time, we have been fortunate to find solutions for several of our clients and provided value-add that a well-capitalized bank like Scotiabank is in a unique position to deliver. The momentum on client connectivity is very strong early on.” He notes that the group has already entered into a number of corporate loan financings and has been a joint lead manager on a specialized middle market CLO.

David Williams adds “We are excited to be partnering with best-in-class credit managers, helping them to finance corporations of all sizes and distribute the risk to end-investors all over the globe. We view these transactions as long-term partnerships rather than one-off deals and look to grow these relationships in meaningful ways for many years to come.”

The new U.S. Structured Credit team is working closely with Scotiabank’s existing Structured Products group who is a market leader in Loan TRS. Together, the groups have facilitated distinct cross-bank collaboration, as groups such as financial sponsors fund finance team, U.S. credit trading, credit repo, securitization/conduit, fixed income derivative solutions, XVA, and global sales teams work together to deliver structured products to institutional clients. Ed Ra adds that, “This is a really nice global effort, where we can achieve synergies across these teams and look at the business holistically – rather than each product working in isolation – to deliver the best final result for our end-clients. With the addition of the U.S. Structured Credit team, our franchise is stronger than ever.”

Issuers and investors drawn to Scotiabank platform

Top industry participants have taken note of Scotiabank’s budding structured credit business. Among them, Blue Owl Technology Credit Advisors LLC chose Scotiabank as Joint Lead Arranger for the August 7, 2023 reset of its US$337.5 million Tech CLO. Scotiabank promptly proved its capabilities, by successfully placing a significant portion of the transaction among its deep network of institutional investors including global asset managers, pension funds, insurers and hedge funds. Blue Owl and Scotiabank have since continued to work together on other capital financing solutions.

Scotiabank also demonstrated its commitment to investors, when in July 2023, it provided seed financing to help Panagram Structured Asset Management, a leading global investment advisor specializing in CLOs and asset backed securities, launch a AAA-rated CLO exchange traded fund (ticker: CLOX) for the U.S. market.

In fact, the Bank will build upon those issuer and investor relationships when it hosts the Scotiabank Inaugural CLO / Private Debt Conference in Toronto on November 16, 2023, to better familiarize the Canadian and international investment community with this dynamic market. Prominent issuers including AllianceBernstein, Antares, Ares, AXA IM Alts, BlackRock, Blackstone, Blue Owl, Cerberus, Fortress, Golub, HPS, MidOcean, Redding Ridge and Voya will be participating on panels at the conference.

Scotiabank’s swift move to build out the structured credit team complements the Bank’s continuous expansion in the U.S., as the Global Banking and Markets division looks to further invest in the U.S. market.

Concludes Kruse, “The establishment of our U.S. structured credit group aligns nicely with Scotiabank’s goal to become a leading bank in the Americas. With private credit and structured credit growing at a rapid pace, CLOs are an important product offering, and a gateway to deliver even broader credit and capital markets solutions for our clients. With Scotiabank’s commitment, and our strong structuring and distribution capability globally, we can bring additive value for issuers and access to investors.”

To learn more, please contact:

Brad Roberts
Managing Director and Co-Head, U.S. Structured Credit

Phone: 212-225-5850

Ed Ra
Head, FICC Structured Products and CLO Warehousing

Phone: 416-863-5996

David Williams
Managing Director and Co-Head, U.S. Structured Credit

Phone: 212-225-5851