management
deal of
On the right track
Performance incentive
What'sNewS Issue 11November 1998 I y
increases, we expect there to be fewer
cases where we choose other lead
managers.' But how, inquired
Euromoney, are you increasing that
capacity in debt capital markets? This
was where the ehoices were 'least
obvious,' Von Ungern-Sternberg said.
'We came to the conclusion that it would
be foolhardy to become a major player
in US treasuries or corporate bonds.'
Again, the driving principle has been: a
sales orientation in certain products and
certain markets. 'We will stick to our
mission of servicing our customers,' he
says, pointing to euro government bonds
(if not in all the major currencies, then
certainly denominations like Dutch,
German, Italian and Spanish) and
^orporate bonds in euro. 'It's a process
W<f efficiently managing the trans-
formation from a Dutch guilder house to
being a respected euro house and raising
our profile sufficiently on the euro
markets.' We may have done few deals
in debt or equity to date, 'but even prior
to the crash we had clients looking to us
to help them into the markets, saying
that 'by the time we're ready next year,
so will you be, and you should count on
us to select you to be lead-managers on
our transactions.'
The role of research, not only in specific
product areas like chicken feed or rice
but also pan-European
sector-based equity
research, was carefully
stressed. 'Somehow,
we've never
commercialized it. The
aim is to make it
attractive for people to
use on a broader scaie.'
The operative question,
particularly under
present conditions is:
how long will it take to
gain crirical mass?
Although our investment
banking operation
already generates returns
in excess of 10 percent,
the challenge is to sub-
stantially extend customer reach around
the world, and visible results on this
front are expected as early as next year.
Says Visser: 'We took the decision right
on time that it was not possible to
service the customer if we had not gone
into investment banking products. The
feedback we get from customers shows
we're on the right track.'
Alex von Ungern-Sternberg
expanding our investment
banking activities
Visser acknowledges that being a
publicly-listed company might make the
process that much more
challenging. But we are
'subject to the same
disciplines... we measure
our return on equity,
balance-sheet usage,
regulatory capital. Our
customers look at that as
well. And in the end we
have our rating.' In
connection with our
rating, Visser reiterated
the group's commitment
to maintain it as long as
possible, describing it as
'an incentive to perform
every day a bit better
than the day before.'
Von Ungern-Sternberg
adds that 'despite the fact that we are
starting a number of new products which
clearly have some market risk, total
niarket risk limits have not actually been
increased. That translates into volatility
of earnings that is less than would
otherwise be expected. What's more,' he
adds, 'the recent volatility was not
worrisome as we were hardly exposed.'
The dient:
Charon Pokphand, a leading
Asian agribusiness conglomerate, and its
146 creditor banks.
facilitating Charon Pokphand's restructuring
of its China operations.
1 APFT, FAR, corporate banking,
trade finance, general management, and the
managing board, with input from seven
offices including Hong Kong, Bangkok, Hong
Kong, and Shanghai.
Charon Pokphand (CP), a large
but highly indebted Thai group
that is Asia's leading F&A
conglomerate, with businesses
ranging from telecommunications to
motorcycle manufacturing in addition
to agricultural production in such
areas as integrated poultry and feed
mills, has consented to an important
advisory mandate awarded to RI on
P behalf of its bank group. Against the
background of Asia's meltdown, a
restructuring of the group's debt
burden was deemed a high priority. In
China, the group operates some 200
business units, half of which are in
compound feed, integrated poultry,
and edible oils. Here, a sell off of
non-core assets, was deemed to be
the best way to move forward. To
execute an orderly sell-down and
realize the inherent value of these
operations, the company requested a
3-year debt moratorium from its
consortium of 146 creditor banks and
financial institutions.
However, the banking consortium led
by HBSC, insisted on independent
confirmation of the value and
prospects of CP's F&A assets. This is
where Rabobank, as an acknow-
ledged expert in this field, stepped in.
In late September, after having
courted the company for many
months, APFT and FAR won a man
date to advise CP on the continuing
viability of its China-based F&A
business units. 'China presents a
special challenge in that rather than
being one homogeneous country, it is
more like a series of small states,
each with different ways and means
of conducting business and different
agricultural profiles,' says Bruce Tozer
of RI Flong Kong. However, 'the
combined knowledge of APFT and
FAR coupled with extensive ex-
perience in other China-based pro-
jects gave us a highly detailed
knowledge-base that we were able to
leverage in winning this deal.'
APFT expects the preliminary
mandate, which will inevitably
require a detailed analysis of CP
businesses in China, may well open
the door for us to provide tailor-
made products such as corporate
finance and M&A further down the
road, as the company seeks to
rebuild its position. This high profile
mandate underscores our image in
Asia as a respected, knowledge-
driven specialist bank, and clearly
demonstrates the real and potential
benefits of cross-border and cross-
functional networking within the
RI team.
