Leveraged finance: big payouts guaranteed

Leveraged finance professionals were well paid last year. This year they look set to be paid more again.

"The deal flow for leveraged financiers has been absolutely amazing for the year to date," says Lee Thacker, a partner in the financial services team at search firm Highland Partners. "Leveraged buyout activity is up 20% to 30% on last year and bonus expectations are very high."

Thanks to guarantees, Thacker says plenty of leveraged finance pros already know the precise dimensions of this year's bonuses, and that senior staff have a handle on next year's as well.

"There have been a lot of two year guarantees," says Thacker. "The shortage of senior people in leveraged finance means they're now fairly mandatory for anyone at managing director level."

Hefty guarantees could yet take a chunk out of the leveraged finance bonus pool at banks like Morgan Stanley, which have hired multiple senior staff in 2006.

However, Thacker says the real impact of two guarantees is likely to be felt in 2007. If the leveraged finance market takes a dive due to a highly anticipated credit crunch, banks could yet come to regret their generosity to this year's hires.

Jon Moulton, founder of private equity group Alchemy Partners, is among those cashing in on the leveraged finance bonanza. According to an article in the Telegraph this weekend, Moulton is about to make tens of millions of pounds from the flotation of Ashmore Investment Management, an emerging market debt specialist, in which he is one of the main shareholders.