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Merrill Fires Structured Debt Bankers, People Say
By Neil Unmack and Abigail Moses
Jan. 9 (Bloomberg) -- Merrill Lynch & Co., the world's biggest brokerage, fired at least eight bankers in London from a group that sold asset-backed debt and invested the firm's money, people with direct knowledge of the situation said.
Daniel Pace, who managed the team of 56, left yesterday, along with Patrizia Canziani, who ran the team in Southern Europe, Olivier Defaux, who worked on mortgage investments, and Armando La Morgia, who ran pricing for the bank's principal investments, according to the people, who declined to be identified because the departures haven't been made public.
Chief Executive Officer John Thain is overhauling Merrill's debt business after $8 billion of writedowns on mortgage-related assets triggered record losses and the ouster of his predecessor Stan O'Neal. Pace's team invested the New York-based company's capital in assets from consumer loans to mortgages and leases, as well as arranging transactions for clients including Newcastle, England-based Northern Rock Plc and Intesa Sanpaolo SpA in Milan.
``It looks like Merrill will have more losses in the first quarter so there should definitely be more cut-backs,'' said Zaheer Ebrahim, a recruiter at Kennedy Associates in London. ``The asset-backed market and structured credit desks have had a lot of upheaval in the past year so that's one area investment banks, structured investment vehicles and rating agencies will be looking to cut costs in.''
Pace declined to comment. Jezz Farr, a London-based spokesman for Merrill Lynch, also declined to comment.
Citigroup, Moody's
Merrill had been expanding its business in European asset- backed bonds and structured credit. The firm bought Wilmslow, England-based mortgage lender Freedom Funding Ltd. in 2006 and Mortgages Plc in London in 2004.
Merrill expanded its business of selling collateralized debt obligations, bonds based on underlying assets, by hiring 23 bankers for derivatives marketing from JPMorgan Chase & Co. led by Antonio Polverino and CDO bankers including Paul Horvath in 2005.
Sales of asset-backed debt in Europe are likely to decline 43 percent to 185 billion euros ($271 billion) this year, according to analysts at Barclays Capital in London.
Citigroup Inc., the biggest U.S. bank, dismissed about 30 employees in its structured-credit group last month.
New York-based credit ratings company Moody's Investors Service said this week it plans to cut about 275 jobs, or 7.5 percent of its employees.
DBRS Ltd., the Toronto-based ratings firm, said yesterday it had closed its European offices and cut about a quarter of its workforce because of the slump in the credit markets, reducing overall staff to about 200 from 270.
`Drastic Cuts'
``There are going to be drastic cuts at the investment banks in securitization departments,'' said Janet Tavakoli, president of consulting firm Tavakoli Structured Finance Inc. in Chicago. ``We're expecting earnings reports that don't look good as the structured finance business wanes. The investment banks should have known that more due diligence was required on some of these mortgage-loan deals.''
By Neil Unmack and Abigail Moses
Jan. 9 (Bloomberg) -- Merrill Lynch & Co., the world's biggest brokerage, fired at least eight bankers in London from a group that sold asset-backed debt and invested the firm's money, people with direct knowledge of the situation said.
Daniel Pace, who managed the team of 56, left yesterday, along with Patrizia Canziani, who ran the team in Southern Europe, Olivier Defaux, who worked on mortgage investments, and Armando La Morgia, who ran pricing for the bank's principal investments, according to the people, who declined to be identified because the departures haven't been made public.
Chief Executive Officer John Thain is overhauling Merrill's debt business after $8 billion of writedowns on mortgage-related assets triggered record losses and the ouster of his predecessor Stan O'Neal. Pace's team invested the New York-based company's capital in assets from consumer loans to mortgages and leases, as well as arranging transactions for clients including Newcastle, England-based Northern Rock Plc and Intesa Sanpaolo SpA in Milan.
``It looks like Merrill will have more losses in the first quarter so there should definitely be more cut-backs,'' said Zaheer Ebrahim, a recruiter at Kennedy Associates in London. ``The asset-backed market and structured credit desks have had a lot of upheaval in the past year so that's one area investment banks, structured investment vehicles and rating agencies will be looking to cut costs in.''
Pace declined to comment. Jezz Farr, a London-based spokesman for Merrill Lynch, also declined to comment.
Citigroup, Moody's
Merrill had been expanding its business in European asset- backed bonds and structured credit. The firm bought Wilmslow, England-based mortgage lender Freedom Funding Ltd. in 2006 and Mortgages Plc in London in 2004.
Merrill expanded its business of selling collateralized debt obligations, bonds based on underlying assets, by hiring 23 bankers for derivatives marketing from JPMorgan Chase & Co. led by Antonio Polverino and CDO bankers including Paul Horvath in 2005.
Sales of asset-backed debt in Europe are likely to decline 43 percent to 185 billion euros ($271 billion) this year, according to analysts at Barclays Capital in London.
Citigroup Inc., the biggest U.S. bank, dismissed about 30 employees in its structured-credit group last month.
New York-based credit ratings company Moody's Investors Service said this week it plans to cut about 275 jobs, or 7.5 percent of its employees.
DBRS Ltd., the Toronto-based ratings firm, said yesterday it had closed its European offices and cut about a quarter of its workforce because of the slump in the credit markets, reducing overall staff to about 200 from 270.
`Drastic Cuts'
``There are going to be drastic cuts at the investment banks in securitization departments,'' said Janet Tavakoli, president of consulting firm Tavakoli Structured Finance Inc. in Chicago. ``We're expecting earnings reports that don't look good as the structured finance business wanes. The investment banks should have known that more due diligence was required on some of these mortgage-loan deals.''