U.S. Bancorp. continues to grow its municipal bond platform with the recent addition of Tim McKeon, who is charged with expanding the bank’s ability to provide issuers with liquidity and debt solutions.
McKeon, who previously served more than 18 years working in bond insurance at MBIA Inc., joined USB last month as senior vice president and managing director in its public sector banking and debt finance division.
He joined the New York-based government and not-for-profit group run by Rich Raffetto.
“Tim will be a key leader in further building USB’s public sector credit-enhancement and debt finance services on a national basis,” said Raffetto, who had led the group since November 2007. “We like Tim’s experience in both the long- and short-term municipal markets, his strong credit skills and his knack for new business development.”
USB has been building out its municipal team in recent months to take advantage of the opportunities it sees arising from the market dislocation.
Richard Kolman, a 30-year industry veteran and former co-head of municipal finance at Goldman, Sachs & Co., was hired in May to launch a muni underwriting group.
The group McKeon joined is distinct. It works to offer issuers liquidity, support of commercial paper programs, variable-rate demand notes, and direct purchase programs.
“Those products are very much in demand right now,” McKeon said. “We’re also working on direct lending, where we can structure short-term lending in lieu of commercial paper of variable-rate demand notes.”
Issuers have been asking USB to become more involved as a liquidity provider because other sources dried up after being downgraded during the financial turmoil, McKeon said.
New issuance of letters of credit totaled just $4.19 billion in the first half, down from $11.29 billion in the same period a year ago, according to Thomson Reuters.
“When I talk to people on the buy side, they say they want to see more business because they have so much paper from the competition — JPMorgan, Bank of America Merrill Lynch, and the bigger banks,” McKeon said, noting that diversification is important to issuers. “There is a ton of capacity in the marketplace for U.S. Bank paper.”
Some of the top letter-of-credit providers in 2008 — including such foreign banks as Dexia Group, Depfa Bank, and Landesbank Baden-Wurttemberg — no longer provide short-term liquidity wraps. As their short-term deals expire, USB has been picking up business by marketing itself as an alternative liquidity provider to renew deals in the secondary market.
“All of these deals are short-term — we’re not talking about locking it in for 30 years,” McKeon said. “So as they run off, a big opportunity presents itself.”
USB was the second-ranked LOC provider last year, writing 69 letters totaling $2.83 billion, amounting to 14% of all product. It also provided four standby purchase agreements worth $310 million, ranking it fourth, according to Thomson Reuters.
USB isn’t ranked in the top 10 so far this year as an LOC provider. McKeon said that’s because the majority of its deals are based on renewals, and league tables don’t include those.
McKeon, who parted ways with MBIA in January, headed its insured derivatives group and led its efforts in the utilities sector.
In his final year, which he describes as the busiest time of his career despite the insurer’s lack of new business, he worked on MBIA’s restructuring and the formation of National Public Finance Guarantee Corp.
Previously, McKeon worked from 1986 to 1991 at the Bank of New York, where he was a vice president of the public utilities group.
He began his career as a credit analyst at Chase Manhattan.
