Wells Fargo & Co. has made two new additions to its government and institutional banking group in response to the rising needs of municipalities struggling to make ends meet amid falling revenue.
Peter Hill, head of the GIB team’s public finance investment banking segment — the umbrella group that contains Wells’ commercial banking, investment banking, and sales and trading capabilities — said the municipal market, like all markets, is subject to cyclicality. Wells sees the dour climate “as an opportunity for us to increasingly be a part of their solution,” he said.
To expand its public power sector business, the firm last month hired Fitch Ratings veteran Karl Pfeil to provide commercial credit strategy and analysis.
“We’re seeing very complicated, complex, large clients with a multitude of needs,” Hill said. “Given the large platform that we have, we square up very well to assist them with their needs.”
Pfeil, who was at Fitch 14 years, will work with public energy clients such as municipal retail electric and gas utilities, joint action agencies and co-operative generation and transmission providers.
“Karl’s background with Fitch will be invaluable to our clients who are looking for solid advice around the deployment of capital in their financing structures,” Hill said.
Wells has participated in 30 public power deals worth $957.4 million so far this calendar year, ranking it the fifth most active co-manager, according to Thomson Reuters. Last year it ranked third on 56 deals worth $1.29 billion.
Across all sectors, Wells has been senior manager on 191 deals worth $6.03 billion so far this year, ranking it the eighth largest underwriter in the industry. In the previous four years the firm has consistently ranked ninth; last year it was book-runner on 378 issues totaling $11.17 billion.
Pfeil joins the GIB group in New York City, where he will partner with Mara Holley, a regional vice president.
Asked if Moody’s Investors Service and Fitch had posed new challenges to the sector by recalibrating municipal ratings to a global scale, Pfeil said simply: no.
“The credit profiles of public power systems, or the ratings from the agencies, are much higher than the average rating for their corporate neighbor,” he said. “So the feeling is that they are both rated on a global scale, and there was no need at this point in time to recalibrate them from the Moody’s or Fitch perspective.”
Hill added that the sector has been experiencing broad demand.
“Given the strong credit ratings and credit profile of a lot of energy clients across the country, we have historically seen great investor demand across the large buyers, the middle-market buyers, and retail,” he said.
Pfeil headed Fitch’s revenue-backed and municipal-structured finance departments. He participated as a senior analyst in credit decisions where he helped update ratings criteria and develop new ratings guidelines. Pfeil also performed analysis of public power and investor-owned utilities, and project financings.
Prior to joining Fitch in 1996, he was an assistant vice president at Ambac Assurance Corp., the bond insurer. He was responsible for the surveillance and underwriting of public power, water and sewer, airport, and tax-backed issuers there.
Wells also announced that Sonia Toledo, who left Bank of America Merrill Lynch in March, started in her new role this week as managing director of public finance in the Northeast.
Wells has senior managed 27 deals worth $1.56 billion in the Northeast so far this year, representing a 3.0% market share. Her activity has helped nudge the firm up to 9th in the regional rankings, versus 12th last year when they garnered a 1.6% market share.
“Our progress in the Northeast is a result of our innovative approach across both the investment banking and commercial banking platforms,” Hill said. “When you couple that with the people we’ve had, pre-merger, and add to that the new hires that we’ve made, you’re starting to see the dividend on that investment.”
Wells Fargo merged with Wachovia Corp. in January 2009.
Toledo will report to former colleague Ron Stack, who left Barclays Capital last June to head up Wells’ northeastern group.
“Ron and I worked together at Lehman Brothers for nine years so we have an excellent working relationship,” she said. “We’re going to be building out the Northeastern practice here at Wells along with the other members of the team.”
Toledo began her career in public finance at Bank of America Merrill Lynch in 1989. After seven years there she switched shops to Lehman Brothers, where she was a managing director for nine years. She returned to Merrill in 2006 for three years.
In her new role, Toledo will work with many of the same clients who, she said, have been “under a tremendous amount of pressure” the last two years.
“Being here at Wells, with the balance sheet, the retail distribution, and all the other assets that this company brings to the table, is a very exciting prospect for me,” Toledo said.
Wells Fargo holds $1.2 trillion in total assets, according to internal data, including $1.7 billion of municipal debt as of year-end 2009, according to Highline Financial.
The GIB group has about 450 employees, including 170 involved in public finance.