Structured for growth: Interview with Paul Hastings’ Cameron Saylor

Law firm Paul Hastings has been expanding its credit practice recently in anticipation of ongoing market growth. Cameron Saylor, a partner in the firm’s structured credit team, talks to Alternative Credit Investor about his outlook for the credit sector…

Alternative Credit Investor (ACI): Tell me about your career at Paul Hastings and in the structured credit team.

Cameron Saylor (CS): At the moment we’re one of the largest collateralised loan obligation (CLO) teams of any law firm in London. And Paul Hastings globally is the largest CLO firm and has been for many years now.

I started out at Clifford Chance doing all kinds of different securitisations and structured finance deals, but no one was really doing CLOs back then. At the end of 2014, I had the opportunity to join Ashurst, which was for a long time the top CLO firm. We then moved our team to Paul Hastings in October 2016, principally because the New York Ashurst team had left for Paul Hastings a year earlier.

Since then, we’ve built the biggest team in terms of people and deal count and league tables and all the metrics you can judge a law firm team by. So we’re really proud of that. We’ve built up incredible clients. We work for all the top banks in London, and we have a really good list of managers as well that we work with.

Read more: Law firm Paul Hastings hires restructuring & private credit team

ACI: You recently expanded your team. What inspired that decision?

CS: Paul Hastings has been expanding significantly, both in London and globally for some time now. And it’s a really exciting environment in that sense. We’ve hired new partners and teams in businesses and new geographies that have, in a sense, transformed the firm over the last 24 months. Just this year, we’ve opened offices in Boston and Dallas.

We’ve hired Brian Maher and a couple of really strong associates in his team. Brian does CLOs for Apollo, so he’s a much more general securitisation lawyer. We’ve always worked a lot with Apollo on the bank side. We’re now able to work with their team on the manager side, having hired Brian. He’ll also help to build out the broader securitisation business together with one of our existing partners.

ACI: What is the landscape like for structured credit at the moment?

CS: For CLOs specifically, it’s very buoyant. I think it’s on track to be the biggest year ever in terms of deal volume.

One reason for this is that there are a lot of managers. Europe has something like 50 or 60 active managers, many of whom have raised capital specifically for this purpose, and they need to deploy it. Then there are the interest rates – rates haven’t gone down, but the pricing on CLOs has gone down. So the margin above Euribor has tightened, which makes it more attractive.

One of the challenges is just the paucity of assets that people need to scramble on and look for. Additionally, the market’s been really busy on the refinancing side. A lot of deals that were done, particularly in the six months after Ukraine in 2022, were done with really high pricing, but with shorter non-calls. And that means they’re able to refinance them without any restriction in a shorter period of time than normal. Normally, it’s about two years. So all those deals have come out of the non-call and they’re being refinanced.

The volume of refinancing has also increased significantly this year. To give you an example, on our team, we just priced a deal for Apollo and that’s our 56th deal of the year [Editor’s note: This interview was conducted in August 2024]. Last year, we did 41 over the whole year. So we’re on track to double our rate in terms of the deal count.

ACI: What emerging trends have you noticed in the structured credit sector?

CS: In the European CLO space, managers raising capital to support the CLO business will continue to be important. It used to be the case that people would rely on others to invest in the equity portion of the CLO, and deal to deal, they would scramble around looking for someone to invest. But now most people are raising dedicated funds that will then, in turn, invest in the CLO. And that’s a trend that’s been going on for some time, but has become even more important, and I think it has proven to be the best way to build a large business for a CLO manager.

On the regulatory side, things are a little bit stable at the moment. That’s not to say that things won’t change, but there aren’t any proposals right now to be changing risk retention, which is the main thing all structured finance suppliers worry about. The reporting side is potentially changing, and we’ve got an eye out on that. But the hope and goal is that it will become simplified and easier for managers and originators to achieve. So there’s a lot of focus on it, but equally not a lot of concern.

Read more: Private credit market passes $3tn valuation

ACI: How are CLOs reshaping the private credit market?

CS: The private credit market is funded by large credit funds that have raised dedicated capital to lend to mid-market companies. Companies like Ares leverage the funds that they’ve raised with bank debt. So if they raise a billion from equity investors or LPs, they might get another billion of bank debt on top of that fund. They then have two billion to invest in the private credit space. What we’ve seen in the US is the use of CLO technology to create a different leverage. So instead of that billion being leveraged with bank debt, it instead is used as equity in CLOs, the proceeds of which are used to invest in private credit.

That’s what’s happened in the US. And it has become a big part of the funding model for private credit lenders.

ACI: What is the main difference between the US and European CLO markets?

CS: I think the main difference is there’s a lot of available bank debt in Europe, and they don’t really need CLOs. It was born in the States during a period where some of the banks were retrenching from lending in that market, so they needed to find a different source of leverage. The CLO market was a good candidate and it grew out of that by necessity. That necessity hasn’t yet happened in Europe, as there’s more lending capacity than borrowing need. It’s an oversupplied market at the moment, and that therefore means it just isn’t necessary.

ACI: What is your outlook for the structured credit market over the next couple of years?

CS: I’m pretty buoyant on the next six, 12, and 18 months. If interest rates are declining, that would be helpful for these deals. If private equity activity increases and then the financing around that increases, that creates more assets that are eligible for CLOs. I think people expect that to happen, and we’re feeling pretty confident in terms of the activities that our clients are going to be undertaking over the next period.