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Yen has dominated in 2001 and the Japanese market is one that everyone wants to be involved in. But demand for quick response times and often complicated structures can make issuing in Japan tough. No one is better placed than Svensk Exportkredit (SEK) - a veteran of the MTN market and still one of the most frequent and innovative yen issuers around - to advise on what the key to success in Japan is. SEK has been in the market from the beginning and is by far the leading issuer of yen MTNs by volume of issues, outstripping its nearest rival by over ¥600 billion ($4.84 billion), according to MTNWare. And it was one of the first foreign issuers to hit the Japanese domestic market back in the late 1970s. Today it has more than 20% of the Uridashi market (Japanese domestic retail issues), while its nearest rival has less than 12%. But Per Akerlind, treasurer and head of debt capital markets at SEK, explains that it has more than just history on its side. It is SEK's pioneering approach that has allowed it to break through into so many markets. Akerlind says: "We have at least 20 different borrowing programmes, eight of which are MTN shelves. We have always wanted to be prepared to meet any investor demand in the world as efficiently and tailor-made as possible. So, for example, if the investor wants Japanese law we can use our Samurai MTN programme." SEK's desire to corner all available markets is shown in the diversity of its portfolio. Its ¥500 billion Samurai MTN programme is the first of its kind. It also has a Hungarian forint shelf, which was signed in February 1999 - one of only two in existence, a Matador programme and a Swiss MTN facility. Its choice of currencies also reveals its diversity. As well as issuing US dollar and yen, SEK has traded in Estonian kroon, Finnish markka, Portuguese escudo and did the first Latvian lat and Lithuanian lita issues in the Euro-MTN market. Goldman Sachs acts as a dealer on SEK's most prominent MTN facility - its euro25 billion ($22.76 billion) Euro-MTN shelf. Justin Bozzino works on the Euro-MTN desk at Goldman Sachs and is impressed by the issuer's innovative nature. He says: "SEK certainly prides itself in being one of the first issuers in any new currency in the Euro-MTN market. What really sets it apart from other issuers is its willingness to consider very small sizes." ABN Amro is particularly impressed by the issuer's responsiveness to new currencies and structures. Phil Whitehurst, MTN structuring group at ABN Amro, says: "SEK's currency diversity and structural range is a direct spin-off from its receptiveness to dealer innovation. Its attitude makes it an early participant in new markets." Despite its interest elsewhere, Japan remains SEK's most important market. At Euromoney's Euro-MTN conference in London in March this year, Johanna Clason, head of trading and capital markets at SEK, said: "Japan is definitely our number one market. We want to be the quickest in the market and we are hungry to do business." As with all international issuers, the weak Japanese economy has provided great opportunity. When MTNWeek carried out its half-year review in July (See MTNWeek, issue 239), it found that yen-denominated trades had increased by 30% in the first half of this quarter on the second half of 2000. With its focus predominantly on yen, SEK has been able to take advantage of the increasing demand coming out of Japan. Its competition are quick to point out that SEK may have an added advantage with its strong credit story. This is particularly the case in Japan, where investors are often attracted by established names and strong credit ratings (SEK is rated AA+ by Standard & Poor's and Aa2 by Moody's). Ever since it was established in 1962, SEK has been at least half-owned by the Swedish government. The government's control increased to 65% in June of last year. But Akerlind believes that there are qualities more important to Japanese investors than credit-worthiness. He holds that Japanese investors, perhaps more than any others, greatly appreciate issuers taking the time to market their product properly. Akerlind says: "We are always concerned that investors know what they are investing in and that they understand the structures. As an institution, we go to Japan at least three to four times a year. We try to spend around a week each time and we visit both intermediaries and investors." This commitment is vital to success in Japan where investors are traditionally conservative, often taking time to come around to new issuers and structures. Dealers agree that Japanese investors are particularly attracted to SEK's dedication. Schroder Salomon Smith Barney has been SEK's most frequent bookrunner this year, managing 44 of SEK's trades in 2001, according to MTNWare. Chris Cox, Euro-MTN trading at SSSB, says: "The sovereign relationship definitely opens up a wider investor base to SEK than to private sector issuers. But what really sets it apart is the investment it has made in developing its Japanese business through regular visits to Tokyo. When its owners changed recently (ABB became a new owner with a 35% holding), SEK immediately went out to talk to investors about what this meant. As a consequence of this commitment, investors are familiar with its name and it is on lots of buy-lists. When offering products with its name on, we are generally pushing against an open door." Whitehurst, at ABN Amro, agrees that SEK's success in Japan does not just lie in its past. He says: "The foundation for its early success was the state link and the rating. But beyond this, it quickly took an intelligent stance with respect to opportunities presented by the market such as getting retail licences, setting low minimum size thresholds and showing a willingness to issue structures." Due to the low interest environment in Japan, structured deals are very common as they enhance the return on investments. Akerlind, at SEK, says: "I believe that it is very important to deliver, specifically in Japan, and because of that intermediaries know us very well. They know they can trust that we can and will execute almost any structure. This gives us a benefit compared with many of our competitors. Keeping us in mind, intermediaries can commit themselves relatively deep against investors without having to wait until Europe wakes up, and therefore the probability of executing deals increases." And Cox, at SSSB, praises SEK for its consideration of structured opportunities. He says: "It is SEK's openness and ability to respond to new structures that is its most impressive feature." But the language barrier to Japan can create an extra problem when attempting to get an issuer's story across to investors. But SEK is pioneering ways to overcome this handicap. Akerlind says: "The language difference is much less of a problem today than it used to be, but it can pose difficulties. In connection with various transactions, we have sold material in Japanese which is even more important today when many smaller regional institutional investors are buying our papers. We are thinking of making this Japanese material a permanent feature and establishing a Japanese version of our website." Whilst the advantages of new technology can allow for such advances, the old rules in Japan still apply. Openness to structures is essential to keep investors' attention, but so are quick response times. Akerlind believes that SEK's desk is perfectly set up to deal with such a demand. He says: "We have, including Johanna Clason and myself, six people involved in long-term funding and we do all types of transactions that appear, whether it is MTNs, private placements, public deals or loans. We try not to specialize, so all of us are capable of doing transactions and are prepared to execute at all times." This approach serves SEK well when dealing with its contacts in Japan. Akerlind explains: "We have open mandates outstanding to many dealers for common structures where they can execute in Japan during Tokyo time and report to us in the morning, Swedish time. It is important though, that the structures are known, as we always price all transactions individually." Whitehurst, at ABN Amro, agrees that a strong credit story and rating are nothing if not backed up with the right people on the desk. He says: "Every good plan needs effective implementation and SEK have a thoroughly professional approach which allows dealers and investors alike to participate in the benefits of its strategy."

dia Co-ordinating arrangers SBI International, Sanwa Bank, Bank of India and Fuji Bank have closed the $120m 2-1/2 year term loan for National Thermal Power Corp. The co-ordinating arrangers held $17.5m apiece.

Innogy, the UK energy company, is due to sign a £

JPMorgan has hired six people for its credit derivatives marketing and financial repackaged business. Five of the six were recruited from Deutsche Bank (Deutsche). It signals JPMorgan's increased focus on SPVs as a means of distribution. The new names are ex-MTN trader Alex Haidas and Jaap Rademaker, both from Deutsche's global credit derivatives desk, Rachel Leetham and Tara Bowler from Deutsche's front office support and Teresa Chick, formerly on Deutsche's credit derivatives marketing team. Katherine Ardiss has also been recruited. She previously worked on financial repackaging at Linklaters. All are expected to start at the bank soon. This follows the hiring of Stephen Stonberg, who joined JPMorgan on August 6, and Desiree Fixler, who joined in July. Stonberg was previously managing director on Deutsche's global credit derivatives desk and Fixler has also worked at Deutsche Bank. Deutsche Bank leads the SPV bookrunner league table, with 308 trades this year. JPMorgan has traded just 20. But Stonberg intends to greatly improve JPMorgan's performance. He says: "JPMorgan has a powerful risk management business - it has always been a focus. Now with the distribution outlets that financial repackaging will provide, we believe we can do a lot more. Volumes will be a lot higher." Stonberg will run financial repackaging under managing director, Jonathan Laredo. He will also be involved in the credit derivatives marketing business under managing director, Bertrand Des Pallieres. Stonberg adds: "We will be taking a different approach and by the way it's set up, JPMorgan's desk will be a lot more interactive. We're looking at setting up the tools and expect to set up about five SPV programmes in the next two to three months."

Several Latin American borrowers will begin marketing new issues next week, as they take advantage of what is shaping up to be a major window of opportunity for issuance in September. Deals to be marketed or priced next week include a $500m five year offering for the Dominican Republic via JP Morgan and Morgan Stanley, a $250m 10 year deal by Grupo Televisa via JP Morgan and Salomon Smith Barney, and a $300m 10 year offering by Chilean corporate Celulosa Arauco.

JPMorgan's head MTN trader, Garrath Fulford, has left the bank, and not of his own accord. The head trader was asked to clear his desk last Thursday, following a review of the bank's headcount (even though the bank recently hired eight credit derivatives people - see front page). But Fulford's swift departure will have left an uneasy atmosphere, as dealers wonder who could be next. It's not all gloom though: Fulford, billed as the market's favourite accountant, is sure to show up on someone else's desk before too long. Rob Nankivell is now head of the desk. He will have the help of traders Miles Hunt and Kentaro Kiso. On a lighter note, the market's action man, CSFB's Simon Hill, has been perfecting his pose in the saddle on his horse-riding holidays in the UK and Spain. And after he had had enough of wearing jodhpurs, Hill took his second-best friend out for a spin - around Silverstone. The faithful old silver Ferrari did him proud as he managed to reach a speed of 140 miles per hour. Good luck to all the dealers enjoying Icelandic hospitality at Landsvirkjun and Islandsbanki's party this weekend. Leak's advice is to wear something warm and waterproof.

Many of the companies that have announced acquisition or merger bids between July 1 and August 23 this year are also familiar names in the MTN market. Bayer, Endesa, General Electric and Royal Bank of Scotland have all been involved in M&A activity in that period and have also been frequent MTN issuers. At a time when credit ratings drive the market however, the downgrades that often accompany M&A activity are an unwelcome side-effect. According to Standard & Poor's research, 50% of all downgrades in 2000 were due to M&A activity. Data on how many upgrades were due to M&A activity was not available. But Judit Seymour, assistant vice president, Euro-MTNs, at Moody's Investor Services, does not believe that the acquirer is more likely to be downgraded than upgraded. She says: "Any rating action depends on the credit quality of the two entities merging, so it is down to each individual case and there is no tendency for the rating action to be a downgrade or an upgrade." There is no sure way of measuring the volume of M&A-driven funding in the MTN market, although one indication is that M&A funding is usually issuer- as opposed to investor-driven. One trader at UBS Warburg claims that 30% of their trades by volume are issuer driven. Chris Jones, at Deutsche Bank, explains that issuer-driven trades for M&A financing have certain characteristics. He says: "When a trade is issuer- rather than investor-driven, the issue itself is more likely to be plain vanilla. This is the quickest way to access the market but may involve sacrificing spread for speed. The notes tend to be shorter maturities, with a view to refinancing once the acquisition is complete." And the trader at UBS Warburg says: "Issuer-driven trades tend to be for bigger amounts because they have a specific requirement and are willing to pay up a little bit." He suggests that some structures are more popular with issuers looking to acquire. He says: "Perpetuals are a popular structure for M&A funding because they rank closer to equity in terms of credit default. Royal Bank of Scotland did some perpetuals last year. And, for example, National Bank of Australia has been doing a lot in the private market where it gets cheaper levels. It is staying at the short end too, so if it doesn't acquire, it won't have long-dated debt outstanding." Royal Bank of Scotland has issued 65 trades this year and is in the middle of a deal with Mellon Financial. But Nigel Owen, treasury analyst at Royal Bank of Scotland, says that they use the MTN programme for opportunistic funding and raise funds for acquisitions in other ways. He says: "We raised funds for the acquisition by placing equity. We tend to keep MTNs to smaller amounts of between $10 million and $20 million - 99% of our deals are of this size and are used for general capital housekeeping. At the moment the assets we are taking on tend to be of a longer maturity, so we're looking to pay a bit more for the longer tenors." But he adds: "In future there's no reason why we can't do capital issues. An MTN programme is cleaner documentation-wise. All we have to do is the pricing supplement." But being in the spotlight for M&A activity can make issuing in the MTN market more difficult as Jones, at Deutsche Bank, explains: "Once the M&A activity is announced, the borrower is obliged to inform the investor as a matter of due diligence. This makes their life harder because each trade may require approval from the lawyers. Often the borrower will wait until the M&A transaction is complete before returning to the market." Paul Drake, marketing director of the financial services group at Standard & Poor's, says that there is no legal obligation to inform the rating agency of any plans. He says: "Companies don't legally have to tell us when they have M&A plans - that is the formal position. If we hear about the acquisition when it goes public, the company could go on CreditWatch, but it is more typical for them to let us know in advance so we can digest the information. Some let us know well in advance if they are worried of a negative impact on their credit rating." But M&A activity can give MTN borrowers some advantages. For example it raises the borrower's profile. The trader at UBS Warburg says there is also the upside of creating investor interest. He says: "Spreads usually widen after a company announces M&A plans and the price falls. But demand may go up slightly - there is always added interest from investors after an announcement - they want to find out where the spreads are."

Mandated arrangers HSBC and JP Morgan have launched a Eu1.5bn benchmark five year revolver for German retailer Metro AG to general syndication. The margin on the new money loan starts at 40bp over Libor, and is linked to a ratings grid.

Egypt EuroWeek understands that SG has won the financial advisory mandate for BG Group and Edison International's LNG project. The integrated project involves the development of the West Delta Deep Marine Concession at an estimated $600m and the construction of a $900m LNG (Liqiud natural gas) processing plant at Idku.

* Former DLJ executive John Smith has been chosen to replace Nick Bannister as ABN Amro's global head of equities. Smith can call on plenty of equity markets experience when he joins the London office in October. He helped to found DLJ International Securities and became its head of international equity research. But he chose not to join Credit Suisse First Boston when it acquired DLJ's equities business late last year and has since been "taking time out and advising a software company".

Deutsche Börse (DB) is set to publish a new code of best practice for companies going public on the Neuer Markt and for lead managers of such IPOs by the middle of 2002. This follows the publication of a report commissioned by the exchange aimed at uncovering the reasons for the disastrous performance of many of the stocks listed on the growth market. Dresdner Kleinwort Wasserstein, Sherman & Sterling and Roland Berger Strategy compiled the report, Gateway to European capital markets - key to growth.