"Debt is becoming the new equity," says Greg Woynarski, co-head of fixed income at Scotia Capital, referring to rebounding interest in high-yield products issued in Canadian dollars.
Over the past two years, Scotia Capital has been assembling a new desk specializing in high risk-and-return paper. So far, the bank's investment arm has hired a total of eight in Toronto, including five origination professionals, one desk analyst and two dedicated high-yield traders.
Other major banks are sure to follow with their own hiring, Woynarski told eFinancialCareers News - if only to gain prevent Scotia Capital from monopolizing the market.
Where other Canadian banks offer high-yield capabilities as add-ons to their investment grade desks, "I have a dedicated desk and trading function - which the other shops' folks do not," he says.
Of some 15 deals completed on the new issuance side of the business last year, Scotia acted as lead bookrunner in 11, says Woynarski. He predicts there will be $4 billion to $5 billion in annual issuance of Canadian high-yield debt going forward.
Why are junk bonds gaining such favor? For starters, issuing debt removes the swap charges that Canadian company issuers typically pay to convert their U.S. dollar debt back into Canadian dollars. Legal expenses are also much lower.
There has also been a major decline in the popularity of Canadian Income Trusts. The once-appealing investment vehicle has lost favor over the last few years because to shifting tax rules.
Those able to take mid-cap and highly leveraged firms through capital restructurings, workouts and bankruptcy" might want to pitch a resume to the folks at Scotia. While his current team is capably filling the needs of the Canadian marketplace, Woynarski says, he soon may augment it with another group of restructuring professionals.