Structured-finance deal breaks new ground

By thinking out of the box and using flexible funding strategies, the small but experienced Intesa Sanpaolo team in Hong Kong was able to deliver a profitable deal

Sophy Buckley

13/02/2018

Building a reputation and portfolio of work in a region where you are massively outgunned is no easy task. But the Intesa Sanpaolo structured-finance team based in Hong Kong has done just that.

How? By using their global experience, ingenuity, tenacity and grace under pressure, and never losing sight of the fact that they are there to solve their clients’ problems.

It’s this ethos that helped them win mandates against far bigger competitors and carve out a thriving, profitable business in Asia. They even won an award at a deal-closing dinner for being Cool, Calm and Collected.

“How we played our hand not only sealed the deal, but enhanced our reputation”

Alessandro Vitale, general manager of Intesa Sanpaolo’s Hong Kong Hub



The accolade came from infrastructure fund Plenary, a long-time partner of Intesa Sanpaolo in Asia, for its work participating in its AU$2bn purchase of high-capacity trains for the city of Melbourne, Australia, in 2016. The deal was the team’s fourth with Plenary and, according to Alessandro Vitale, general manager of Intesa Sanpaolo’s Hong Kong Hub, it stands out for a number of reasons.

“Although we have a very good working relationship, we knew that any hurdles we encountered in delivering our share of the funding would be our problem, not theirs,” he says. And there were hurdles.

The first related to the cost of providing competitive funds for a medium-term deal.

The team’s solution was to use a flexible structure that kept the treasury department in Milan happy and allowed it to offer funds at an acceptable rate for its needs.

Graham Jang, managing director of structured finance APAC, Hong Kong, suggested using a flexible funding strategy. “Our thinking was that we could use a dynamic funding arrangement that would allow us to be part of the deal and put us in prime position to take advantage later of the associated cross-selling opportunities such as interest-rate swaps,” he explains.

The result? Intesa Sanpaolo delivered financing as competitive as any other market player, allowing the client to close the deal without the worry of higher margins.

“We believe we are pioneers in structuring funding like this, shifting from a static model to a dynamic funding strategy,” says Jang.

The strategy allows the bank to participate in a region that might otherwise be closed to it, helping build its reputation and open up new opportunities. But according to Vitale, the funding cost of the deal wasn’t the only hurdle.

“Brexit happened between Plenary being named as the preferred bidder in June and the close of the deal in November, which threw all our careful return calculations into disarray. There was no going to the client and asking to change terms.

“Instead we took a view. Even though the returns were at risk, we didn’t panic. We realised that by the time the deal closed we’d be in a better position. If the worst came to the worst, we could always sell out. We carried on,” says Jang.

The upset was such that, at the behest of the state government of Victoria, Plenary rang the team in Hong Kong – it was the only participating European bank – to check all was still good.

“We believe we are pioneers in structuring funding like this, shifting from a long-term model to a short-term strategy”

Graham Jang, managing director of structured finance APAC, Intesa Sanpaolo, Hong Kong



“We realised that to be anything other than positive would have destroyed our reputation. In fact, how we played our hand not only sealed the deal, but enhanced our reputation,” says Jang. Hence, the Cool, Calm and Collected award. It also helped boost the bank’s visibility, leading to more approaches and further opportunities to innovate.

Rules governing public private partnership are strict about the same lenders supporting multiple bids. So when the bank has a conflict of interest, it tries to involve one of its structured-finance teams in New York, Milan or London.

“This increases our chances of being part of the winning bid while remaining within PPP rules. In addition, it showcases the expertise of Intesa Sanpaolo’s different regional teams to prospective clients in Asia,” says Vitale.

Success comes down to using Intesa Sanpaolo’s international reach and experience, along with its local knowledge and relationships, to ensure that the bank participates at the right level around the world.

“Even though we are a small team here in Hong Kong, we can play with the big boys – taking an equal role in the high-capacity trains for Melbourne deal, for example,” says Vitale. “We wouldn’t have it any other way.”

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