    
 EUROMONEY
September 2003 Issue
Volume 34, Number 413
Bankings' New Breed
"There is a void that the big banks just can't fill for direct debt placement on a smaller scale. Ergo there's a vacuum," says Stephen Schechter. "Ergo Schechter & Co."
The eponymous firm he founded is the latest home for Schechter, an American who started in investment banking 40 years ago. Ex-Schroders and Lazard, he is now his own boss and espouses the theory that big banks have lost the personal touch that guarantees the senior attention and level of service that clients want. For private debt placements, sale and leasebacks, or financing £20 million to £50 million buyouts or rolling stock or corporate aircraft or whatever else it needs, Schechter feels that your average FTSE 250 Company can get a better service from a smaller outfit.
"The big banks want to do M&A. Private debt deals, leasing, or small buyouts are greeted with a loud yawn in the boardroom," he says. "We want to provide a high-quality investment banking service on deals that their statutory bankers don't give a damn about."
Schechter enjoys a higher profile in the UK because of his work on UK football club ticket sale securitizations. On the walls of his office, just off Berkeley Square, hang replica club shirts commemorating deals where he was exclusive placement agent at Schroders and Lazard for Newcastle United, Southampton, Leicester City, Ipswich Town, and Leeds United. Schechter belongs to a small but very influential group of non-native businessmen - think Rupert Murdoch or Roman Abramovich - who have revolutionized the financial structure of England's national game. When he makes the newspapers, he's just as likely to feature on the sports pages than in the business section.
For example, when both Leicester and Ipswich found themselves in financial trouble after relegation and the collapse of the ITV Digital broadcasting deal, Schechter had to explain their securitization deals to the press. The American does so with the passionate insight of the life-long season-ticket holder who doesn't need to use the word soccer.
"Before 1997, no English football club had long-term financing," he says. He points out that Leicester's problems were with its bank lenders, not Teachers Insurance, the US pension fund that bought the bonds that financed Leicester's new stadium. "With Ipswich, neither the stadium company nor the finance vehicle went into administration. And look at the Southampton model. Because they effectively got another £10 million to spend, they could upgrade their players. They got to the FA Cup Final, that got them into Europe, they finished eighth in the Premiership, and they got back-to-back victories over Tottenham, which was great after Glenn Hoddle had left Southampton to manage Tottenham." All of this is delivered in a thick Queens accent.
Since he left Lazard to set up Schechter & Co in the spring of 2002, Schechter has worked on a £15 million, 15-year note issue by Norwich City FC and has taken private-placement technology into the Bundesliga with a €85 million private placement for German club Schalke 04.
But there's more to Schechter & Co than football. "We still do the football club deals, and they are the high-profile part of the business, but we do lots of other stuff too," says Schechter's eldest son, Larry, who joined Schechter & Co in December last year. As well as working at Lehman Brothers, Schechter Junior has studied film and television at the University of Southern California and produced and directed his own movie, a black comedy called One Hit Wonder. The firm has been exclusive placement agent on a £22 million equipment lease for Dutch B2B distribution services group Hagemeyer, and a $20 million facility to fund the December 2002 buyout of small arms manufacturer Heckler & Koch from BAE Systems, among other deals.
Schechter & Co was never part of a grand plan. Schechter retired twice before resuming his career. In 2000, aged 55, he quit Schroders, which had brought him to London five years previously to help build its cross-border debt practice. After all of two weeks off, he joined Lazard, where he stayed until early 2002.
"Bruce Wasserstein had come on board and the whole character of the place was changing," Schechter says of his decision to quit. During another stab at retirement, Schechter kept getting calls from clients and contacts who wanted his help structuring and placing deals. He decided to go it alone. After a few months as a one-man band testing demand, Schechter hired Luke Reeve, a second-year analyst at Lazard. Schechter's former PA followed. Along with the two Schechters, they make up the four-strong team that is Schechter & Co.
For a small outfit, Schechter & Co is not short on ambition. Schechter senior insists that if it wants to, it can go head to head with larger competition, which he dubs "the balance-sheet banks", for nine-figure deals as well as smaller transactions. Indeed, because of its diminutive size, Schechter maintains that his firm can do all sorts of things as well as, if not better than, its larger rivals.
"We don't have their conflict problems," says Schechter. "And we do everything in-house - the banking, the structuring, the placement. The big banks pass that around between three different teams, and it doesn't work."
There are no targets for future growth in terms of staff numbers or turnover; there is one simple goal. "I want to be the best boutique in the debt market," says Schechter.
Mark Brown
Euromoney Debt Markets Reporter
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Schechter & Co. Limited