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* Republic of Austria Rating: Aaa/AAA/AAA

Leveraged finance specialist are gearing up for a busy first quarter as dealflow picks up across Europe. The last quarter of 2001 was a flat period for the LBO market following the US terrorist attacks and more widespread concerns about the state of the global economy.

In a repeat pattern of trading seen last week, dollar swap spreads dipped in the early part of the week only to regain ground later. By close yesterday (Thursday), the five year had climbed to around 69.75bp over Treasuries while the 10 year was at 70.5bp. A relaxation of new issue business this week helped swap spreads gain higher levels. However, for the most part dollar swaps followed a directional trading pattern. For every move to higher yields in the Treasury market, swap spreads inched wider.

Turkey has kicked off its $3bn 2002 funding plans with a $600m 10 year bond via Goldman Sachs and Credit Suisse First Boston. The bond came as no surprise to the market, following soon after the 2012 issues from Brazil, Mexico and the Philippines.

Airtours is thought to be tapping the market soon for a £200m credit. The deal is likely to refinance a £250m three year deal arranged by Barclays Capital in April 2000. That deal paid a margin of 40bp over Libor with a commitment fee of 20bp and a utilisation fee of 5bp if over 50% drawn.

Turkey has kicked off its $3bn 2002 funding plans with a $600m 10 year bond via Goldman Sachs and Credit Suisse First Boston. The bond came as no surprise to the market, following soon after the 2012 issues from Brazil, Mexico and the Philippines.

The UK government warned holders of the £400m Railtrack convertible bond this week that it could stop paying interest on the debt after investors refused to join the debt standstill agreement. Convertible bondholders are protesting about their loss of equity value following the decision to place Railtrack into administration in October.

The 23 US dollar trades all came from A3-rated borrowers and over. Just one US dollar trade so far this year has come from a triple-B rated borrower. The biggest trade came from Rabobank Nederland. The $1.1 billion CMS-linked note was managed by Mizuho and will mature on January 30 2017. Rabobank Nederland also issued a $10.30 million three-year range accrual note. The bookrunner was JPMorgan. Other issuers in the currency were Bank of Scotland Treasury Services with a $250 million two-year note and Instituto de Credito Oficial, also with an amount of $250 million, which goes out to 2005. Electricite de France also closed a $250 million syndicated deal via Royal Bank of Canada Europe and Salomon Smith Barney.

Globals * KfW International Finance

All but one of the 17 US dollar trades were from the private bank sector. The lowest-rated issuer was Unibanco - Uniao de Bancos Brasileiros did three notes: a $9.21 million one-month note, a $1.1 million six-month trade and a $1 million six-month deal. Rabobank Nederland issued two notes for $10 million. One is a four-year note and pays a final coupon of 5.250%. And the other goes out five years and 10 months and pays a final coupon of 5%. The only private corporate was Sigma Finance Corp with a $16.80 million three-year trade.

US dollar made up about 20% of the market with $584 million traded off 12 deals. BNP Paribas did two six-month notes for Banque Generale du Luxembourg. The first was a $2 million inverse floating-rate trade with annual call options. It is due for settlement on January 29. And the second note was a $10 million trade with the same structure, due on February 14. Pfandbrief Bank International closed a $33 million trade via Dresdner Bank. It is due on January 22 and goes out to January 23 2003. The plain vanilla deal pays a fixed rate of 2.135%. Toyota Motor Credit Corp was in the market again with a $100 million four-year note that pays interest semi-annually and Maquarie Bank did a $100 million two-year FRN note via UBS Warburg.

* Bank of Scotland Treasury Services plc Guarantor: Bank of Scotland