The biggest issuers in the market had their eye on MTNWeek's best Euro-MTN borrower award at its annual awards ceremony earlier this month. Many big names were in the running. Dealers praised triple-A rated KfW for its increasing flexibility with regard to structure and currency over the past year. BCEE impressed many with its wide variety of structures. And 1998's best new Euro-MTN borrower, SNS bank, was in the running for its responsiveness and competitive levels. But MTNWeek chose an issuer that has kept its eye on the ball throughout the past 12 months. The Royal Bank of Scotland (RBS) has come through a merger and built a small, but efficient, Euro-MTN funding desk. Dealers commended the issuer for its flexibility, all-round knowledge, professionalism and first class marketing. It received more nominations than any other borrower. But it was RBS's surge in issuance that was a key factor behind the judges' choice when handing out the award. The borrower issued 169 trades for $4.44 billion during the awards period (March 1 2001 to February 28 2002) off its Euro-MTN programme. It closed just 13 trades in the previous awards year. Ron Huggett, capital raising director at RBS, has been working on the bank's bond desk since its merger with Williams & Glyn in 1985. He says that the low numbers of the previous year were down to a transition period following RBS's acquisition of NatWest in March 2000. "Both RBS and NatWest had existing MTN programmes," explains Huggett. "The integration process following the acquisition meant that for that year the programme didn't initially have the attention it deserved." Most of the issuance done off the NatWest programme was in short-dated yen, so the decision was made to do all future issuance off the RBS MTN shelf, which was already much more widely used. Huggett also had to put a whole new desk in place. Sanjay Sofat, treasury manager, was the first to join in June 2000, coming over from NatWest. Next was Nigel Owen, treasury analyst, who moved onto the capital raising team in April 2001. And finally Richard Harding, senior treasury manager, came aboard in August of last year. "It was a whole new desk and we needed to make various changes," says Huggett. "Putting the team together was a big challenge for myself. I had to pick the right people and make sure that they would operate as a unit." The team is small compared to the average MTN desk, but Owen believes that this is beneficial. He says: "One of the advantages of being a small team is that everybody does know what's going on. We are all authorized to put through every trade. We work very much on a basis of whoever picks up the phone deals with the person on the other end." And this flexible approach is appreciated by dealers in the market. One said: "There is always someone there on the desk. They are never too busy and were even available over the Christmas break." HSBC has been RBS's most frequent bookrunner since the beginning of 2001. Fergus Kiely, head of Euro-MTNs at HSBC, believes that RBS's small team allows for great stability. He says: "RBS has been very consistent in its posted levels. This gives dealers confidence in quoting prices to investors, in that if it were to deal, the levels would be accurate." This consistency is important to RBS's Euro-MTN operation as it prides itself on the fact that dealers know what to expect. "We do try to be consistent every year," says Huggett. "We don't dramatically change our targets, levels and prices. The idea of shopping around for the cheapest deal isn't our style." And Sofat is convinced that RBS's style of operating is now known right across the market. He says: "One thing that sets us apart is that we don't chase trades. It is not the way we do business. And a lot of dealers now know that this is not the RBS style." And RBS's Euro-MTN business has flourished through such consistency. The euro1 billion ($889 million) benchmark deal issued last summer was a standard bearer for the market and was noted by many dealers. "It really set the market alight," says Sofat. "If you look around September 11 and the Enron period, it was the one trade that has been very consistent while many others were moving." One of RBS's main strengths over the past year has been its marketing and this drew admiration from many dealers. One commented: "It has come a very long way over the past year and this is in part down to the way that its team always provides the market with very helpful information about themselves. Its presentations are always first class." Huggett was surprised at this particular piece of praise. He says: "It is interesting that dealers have said this as we are always trying to improve our marketing. I don't think anybody would ever tell you they have it 100% right. We put a lot of work into our investor presentations, whether it is roadshows or attending conferences. One of the things we have worked on is to get across the fact that RBS is a very different bank to what it was two years ago. We are now the fifth largest bank in the world by market capitalization and many people don't realise this and would put JPMorgan Chase, Deutsche and UBS ahead of us." Sofat believes that RBS's insistence on putting names to faces is what has really impressed dealers. "The personal touch is our key," says Sofat. "We try to make a point of meeting all dealers even if it's just for a hello and a coffee or a pint. It means that they get to see who is on the other side of the phone. It does make the difference in this market." So what advice does the Euro-MTN market's best borrower have for any new entrants? "You need to get everything right from day one," says Huggett. "The programme has to be as flexible as anything you might potentially want to use. Be careful in your choice of dealers and treat them all fairly. Talk to them first - listen to them - but make sure that they listen to you also. And put a lot of work into the programme. Don't just set it up and think that it is going to look after itself. Be responsible for it." And Huggett intends to keep listening to his own advice and will keep the RBS Euro-MTN facility as a central component to the bank's continued rise. He says: "Our growth is continuing and the Euro-MTN programme will be a key element to support our growing balance sheet. We have just increased the size of the programme to £
April 26, 2002
