Private Placement Market Profile: Mark Nichols, founder of Global Capital Advisers
April 30, 2009
Mark Nichols is a long-time veteran of both the private placement market and the overall capital markets. He got his start in 1982 with Bank of America, helping the bank develop its first commercial paper marketing program, and stayed with the bank in a number of different capacities until 2007, spending 14 years as a managing director in the bank's private placement group. There he was involved in over 100 transactions, raising more than $18 billion in capital for issuers.
Taking his years of experience in the private placement market, Nichols founded private placement advisory firm Global Capital Advisors LLC in February of 2008. Since its inception, GCA has signed-on clients from a variety of industries, including private placement issuers Wolseley plc and Fairfax Media Ltd.
Earlier this month, Nichols spoke with PPL Managing Editor Grant Catton about GCA and its growing role in the private placement market…
GC: What does Global Capital Advisors do?
MN: Global Capital Advisors focuses on the needs of both prospective and existing issuers of debt private placements. Our firm provides “full life cycle” services to clients, from advice on whether they would be a good candidate for a private placement, to advice on the agent selection process, through to execution and distribution advice and, finally, post-closing investor relations advisory services.
In addition, we recently recruited the former head of Banc of America Securities’ Ratings Advisory Group, Robert Weiss as senior advisor to build our Ratings Advisory practice as a new offering for clients.
What made you realize there was a need for your type of advisory services in the private placement market?
Since the financial crisis began, the private placement market has undergone an unprecedented loss of seasoned, experienced talent on both the agent and investor sides. GCA was founded on the idea that traditional Wall Street models must adapt to changed realities, and that there would be increased opportunities for an independent advisory firm to complement the work of large banks in meeting the needs of issuers.
Over the span of 14-years doing private placements at Banc of America Securities, I worked with a wide range of domestic and off-shore issuers and a broad spectrum of the investor universe. Throughout that time, the private placement market has proved to be a flexible and reliable source of medium to long-term capital.
Having said that, the market has struggled to overcome its status as a niche source of debt capital compared to the public markets. Unfortunately, many issuers continue to view the market as less than “user friendly.” The reality is that our market isn’t structurally geared to foster the growth of long-term personal and institutional ties between issuers and investors. This can result in less-than-optimal outcomes in waiver and amendment requests, as well as disappointing results when issuers return to market under less than ideal conditions.
Basically, I saw a real difference in the way issuers approached their banks and bankers, and the way they dealt with their institutional investors. As a source of critical working capital and cash management support, banks are highly valued by issuers and they expend considerable effort in forging and strengthening ties with their bankers. For their part, bankers aggressively market a broad array of products to issuers and, though providing only short to medium term funding, seek to gain an ever greater “share of mind” through pro-active relationship management.
In contrast, both private placement agents and issuers have historically viewed private placements in purely “transactional” terms, giving little thought to what actually is the start of a medium to long-term relationship between the issuer and its investors. Investors, for their part, are neither incented, structured, nor staffed, to take pro-active steps to forge and nurture their issuer relationships.
Over time, issuers returning to market for waivers or amendments, or even additional capital, have often found they are dealing with virtual strangers on the investor side and are surprised when their investment analyst is not approaching their request from a “relationship” perspective.
Therefore, GCA encourages issuers to be pro-active in forging strong investor relationships. This effort begins at the outset of a transaction where we work to encourage issuers “in the market” to lay a foundation of trust based on candor and full disclosure. Post-Closing, we work with our clients to develop strategies to insure they maintain on-going dialogue and engagement with their investor base through regular contact and communication with individuals at each firm in a position to influence the outcome of future transactions.
In a time when the Private Placement Market is fighting to increase issuance and expand its issuer base, how can advisory services like yours help the overall market?
The private market offers an important and stable source of medium to long-term capital for issuers who otherwise may be finding traditional sources of capital less reliable. The unprecedented losses incurred by the banking system have resulted in many of the world’s largest financial institutions having to accept government support to remain viable. Such support is effectively contingent on the renewed commitment of these banks to allocate scarce capital to serving the needs of their home markets.
In Australia, for example, over half of the syndicated loan capital had historically been provided by foreign banks, many of whom are now expected to cut back their commitments to Australian companies. With the public bond market in Australia largely closed to any but government guaranteed issuers, this leaves the private placement market as a critical remaining source of capital.
Since we’re exclusively focused on the needs of issuers of debt private placements, GCA is positioned to both promote this market and assist issuers looking to access it. As investor relations adviser, GCA is also in a position to insure that issuers who return to the market, either for amendments, waivers, or new capital, have the best possible chance for success based on having forged strong ties with their investors.
With the addition of Robert Weiss as Senior Advisor responsible for building out our Ratings Advisory practice, GCA can advise first-time issuers of private placements, as to whether it makes sense to get a rating pre-launch from either an NRSRO, or directly from the NAIC. We can also advise clients with an existing NAIC rating as to how best to get that rating increased; or, if it has been decreased, how to fashion an effective appeal in cooperation with the lead investor.
In times of market stress, bringing more certainty to an issuer’s implied credit profile will be increasingly important as we all try to grow this market.
You mentioned amendments and waivers. With so many of those going on now, how does GCA come into play?
In many cases, having an independent advisor on waivers and amendments removes a potential irritant with investors who may prefer to deal with someone other than the legacy intermediary.
In the assignments we have had to date, we have been sought out by issuers who value the independence of our professionals, whose advice is uninfluenced by any past role as placement agent, or by any other financial commitments to the company.
Is your firm the first or only firm of its type to serve the private placement market?
Our firm is the only consulting firm solely dedicated to the needs of issuers of debt private placements. We are also the only firm focusing on building an Investor Relations Advisory practice. With extensive experience interacting with investors in the U.S. private placement market, and as a member of the National Investor Relations Institute, we believe we have the credentials to provide exceptional advice and counsel to issuers as they look to improve their investor relationships. In a world of scarce capital, we believe issuers need to be pro-active in forging and strengthening relationships with key providers of medium to long-term debt.
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