Andrew Garvey, head of capital markets banking at Cain Brothers, has departed the boutique firm after nearly three years, the investment bank confirmed Tuesday.
Garvey, who joined Cain in February 2008, declined to offer additional comment or say if he was assuming a new role. He previously spent eight and a half years as a managing director at Morgan Stanley, where he initially led its derivatives group. Garvey also headed Morgan Stanley’s tax-exempt unit until financial turmoil upended the market.
His career in municipal finance began in 1992 with Lehman Brothers, where he led the derivatives business for seven years.
Cain is an investment bank and advisory firm with a health care focus that encompasses hospitals, long-term-care providers, and nonprofit health care systems. The New York-based boutique has almost 30 years of experience in the field, with personnel operating out of Chicago, Houston, San Francisco, Los Angeles, Indianapolis, St. Louis, Atlanta, and Orlando, Fla.
Garvey will be replaced by Scott Smith, a managing director who led the group before Garvey joined Cain in 2008.
“This is a role I held for a number of years before Andrew started,” Smith said. “With his departure I’m just stepping back into that full time.”
Smith is a principal shareholder of the employee-owned bank and has been a member of its executive committee and board of directors since 2004. After spending six years at Ziegler Securities, Smith joined Cain in 1998 to run the special products group, which involved working with complex solutions, such as tender-option bond debt restructurings, nonrated synthetic variable-rate debt, inflation-linked notes, and call option monetizations
Smith is also the president of Cain Brothers Asset Management, an institutional investment advisory subsidiary founded less than a year ago.
Smith said CBAM is the culmination of Cain Brothers dabbling in the investment advisory and structured investment business for the past 10 or 15 years.
“We came to the conclusion that there are not a lot of real good alternatives for tax-exempt health care systems that have large investment portfolios,” Smith said. “We think one of our strengths is understanding our clients’ objectives and goals, not just in terms of their investment portfolios but their overall business.”
CBAM’s six-person trading team is based out of Orlando, Fla., and led by chief investment officer Rob Roy.
Roy joined Cain Brothers in October after nine years as chief investment officer at Adventist Health System, a multi-state health care organization.
“We’re up to close to $2 billion of assets under management, and we’re hoping to grow that business significantly,” Smith said of CBAM.
The bank is growing in part because it anticipates “remarkable changes” in health care finance now that the 2010 legislation was signed into law in March, according to Robert Fraiman Jr., Cain’s president and chief executive officer.
“Most of the analysts out there view health care reform – which is really insurance reform, as it has to do with putting more people into the insurance system – as a net positive for hospitals,” Fraiman said. “The interesting thing is that hospitals are going to require significant amounts of capital to keep up with the increased volumes that they are going to see as a result of the health care reform.”
To raise capital, Fraiman said some hospitals may need to find more lines of non-traditional funding, such as private equity.
Cain was involved in one such transaction in March when it counseled Caritas Christi Health Care, a Catholic hospital system with 13,000 employees, on its $830 million acquisition by the New York buyout group Cerberus Capital Management LP.
“That transaction was all about raising capital,” Fraiman said. “We think that’s a sign of things to come. We’ll see other crossover transactions where private or other types of capital come into the hospital market.”
Fraiman, who co-founded the health care investment banking group at Bear Stearns and later headed health care investment banking at BMO Capital Markets, has led Cain since January. He took over from James Cain, who co-founded the bank in 1982.
Cain has led underwriting efforts on four deals so far in 2010 totaling $239 million, making it the 13th-largest senior manager in the health care sector. Last year the bank ranked 17th on nine deals worth $263.3 million, according to Thomson Reuters.
The bank also served as financial adviser for a $1.036 billion bond issue from the Sisters of Charity of Leavenworth Health System in Lenexa, Kan., which operates 11 hospitals across four states.
