For a long time, we have been concerned by the common practice in Over the Counter (“OTC”) derivative markets of end users conducting all their hedging activity with a small group of their “relationship” banks.
Corporate finance theory has long established that companies should maximise their Enterprise Value no matter who the shareholders are.
Banks have traditionally provided funding and hedging acting as principals. The financial crisis has critically reduced banks’ appetite for risk, thus often reducing their role in several traditional investment banking functions to that of ‘matched brokers’.
Private Placements
Although our preference is for borrowers to maintain options with multiple investors, where circumstances determine this to be the most appropriate route (for example on financings of a specialist nature), unlisted, bi-lateral private placements can be arranged with the active investors in this area.
