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John Deere, the world's largest agricultural equipment manufacturer, is set to sign a $1 billion Euro-MTN facility. It will be the third US corporate of the year to join the market following Textron and Combined Global Funding. Deutsche Bank has scooped the arrangership, its eighteenth this year. It is the leading arranger in 2000 so far. John Deere is a veteran of the debt capital markets. In its funding collection are two Euro-CP programmes, signed in 1989 and 1999, two domestic MTN programmes and two US CP shelves. It also issued a $150 million Eurobond in May 1998. Deutsche Bank was the bookrunner off the deal. The issuer, headquartered in Moline, Illinois, markets its products and equipment in 150 countries, and is probably best known for its tractors. The dealer group off the programme comprises the arranger, ABN Amro, BNP Paribas, Bank of America, Credit Agricole Indosuez, Credit Suisse First Boston, Deutsche Bank, JP Morgan, Merrill Lynch, Salomon Smith Barney and SG.

Brazil HypoVereinsbank (New York) has completed a $300m two year L/C facility for Banco Itau SA. Proceeds are to support a CP programme.

Ever the flash city trader, Gavin Eddy of Warburgs now has a new claim to fame. His swanky Shoreditch flat is to be the setting for the latest advert for the 4-wheel drive offroader - the Toyota Rav 4. But it seems that though the advertising agency was very taken with Gavin's pad, it decided it didn't really need his acting services. They're using a more muscular male model to drape over the bonnet. Better luck next time eh Gav? And the usual crowd turned up to Rupert Lewis' birthday bash in Fulham last weekend, including Gayle Turner, Conor Gallagher and Rob Stoole, also from JP Morgan, (all they need is Timmy the dog and they'd be the Famous Five). CCS' Sean Murphy also joined the party, as did Johnny Fine, the swaps trader from JP Morgan, now a regular in the Leak Table. It may even be worthwhile him setting his sights on Rupert's crown to be star of Leak 2000. With Diageo's Andrew Moorfield and Greenwich's Matt Pass now out of the glitzy world of MTNs, there's all to play for...

We all know that the MTN market attracts some pretty unsavoury types (and we're not just talking about the Diageo treasury team) but it would seem that a spiv of the first order has penetrated the sacred world of power reverse duals. Private Eye, the London-based magazine that roots out scandal and corruption in high places, has unearthed a scam artist with a predilection for young boys, sadomasochism and . . . medium term notes. If we are to believe the latest edition of the rag, this gentleman with a particularly sordid past has been trying to sell MTNs to poor unsuspecting grannies and pocketing the cash. Unfortunately the article also questions the MTN market's reputation as a place of high finance and high morals. It calls an MTN a "fictitious financing mechanism", a "scam" and describes the market as "secret" and even "non-existent". Dealers are outraged by the suggestion that they earn huge amounts of money for doing very little. But perhaps Deutsche's Tiina Lee can smooth their ruffled feathers. She's been appointed chair of IPMA's MTN subcommittee. An honour indeed. She follows such luminaries in the post as DLJ's Matt Carter and ex-Daiwa MTNer Tony Wilson, who is now at the treasury of Arab Bank.

Chase has finally appointed a head of MTNs after a year of head-hunting every dealer in the market. At last Hugo Varney never need look at an MTN ever again. But, alas, our lives are not to be enlivened by Bruce Cairnduff. Chase has decided that they should go for the best money can buy and that man is . . . Garrath Fulford. Yes, the star of the MTN conference circuit, whose speeches are always the highlight of the show, has managed to escape from UBS in Tokyo. He moved there when Gavin Eddy started at the bank in London a year ago. This is Garrath's first move, after spending eight years at Warburg, six of those in MTNs. Joining him on the desk will be Rob Nankivell, an internal transfer from the Sydney branch. Back at Warburg, Stuart Goodwin is being sent off to Tokyo to replace Garrath. But poor Stu is so attached to his new baby - a Jaguar - that he's having it shipped all the way over. Maybe someone should tell him that they do have cars in Tokyo? A new MTNer will be joining Gavin in London soon, someone new to the market. Lets hope he speaks better English than the new Barclays head . . .

The debut note off PSA Corporation's (PSA) $2 billion debt issuance facility has been launched. The five-year $500 million deal pays 7.125nd was lead-managed by Morgan Stanley Dean Witter and JP Morgan, co-arrangers off the shelf. It was signed on July 12. PSA is the second Singaporean borrower to join the market this year. Peter So, associate, capital markets at JP Morgan, believes issuance is tough for the sector. He says: "These issuers would like to place all their notes and have the price they want, but there must be a trade-off between the two." PSA is one of the world's biggest container terminal operators. Its dealers are Credit Suisse First Boston, Deutsche Bank, Development Bank of Singapore, Merrill Lynch, JP Morgan, Morgan Stanley Dean Witter, Salomon Smith Barney and UBS Warburg.

Rabo Australia has raised the ceiling off its Euro-CP programme from A$2 billion ($1.18 billion) to A$3 billion. Citibank and National Australia Bank have been added to the dealer panel. Captiva III Finance has been dropped from the group.

Region of Umbria (Umbria) paved the way for more local authorities in Italy to join the market when it signed the first wholly-underwritten Euro-MTN programme on December 16, last year. This is a step forward for the Italian regions which are bound by strict government regulations regarding international borrowing, since the programme can show all-in funding costs from the outset. Another route into capital markets has been forged for state issuers in Italy and beyond. Umbria's euro2.5 billion ($2.58 billion) facility is arranged and underwritten by Chase Manhattan (Chase), DePfa Bank Europe (DePfa), and Dexia Capital Markets-Crediop (Crediop). Claudio Zecchi, head of financial markets at Crediop, believes that special facilities such as Umbria's could open up the capital markets to more issuers of this type. He says: "It is the first programme of its kind. It is a breakthrough and it will have very interesting implications for other local authorities." Banks involved with Umbria's programme hope it will inspire other government issuers, particularly small regions which otherwise might not have considered the market, to set up Euro-MTN facilities. Chase in Rome devised the structure of Umbria's programme. A spokesman at Chase believes the idea could work in other cases. He says: "This structure was tailored to the needs of the region. And we believe others may have similar needs. We could replicate this structure for them." Italian regions were only permitted by law to issue Eurobonds in 1996. Since then, seven Italian government borrowers have signed Euro-MTN programmes including Region of Lazio, City of Rome and the Republic itself. Deirdre Farrell, manager of business development at DePfa, says: "Increasingly the Italian regions are targeting the capital markets for funding as opposed to the traditional domestic loan market. While only five of the 20 regions have tapped the bond market to date it is expected that there will be increasing activity in the capital markets given the number of regions which are pursuing credit ratings." And Zecchi, at Crediop, is optimistic of growth. He says: "When the market develops and benchmarks are set, it will be easier for these issuers to have a standard Euro-MTN facility. For now it is difficult to know how much it will cost to use this type of security." Umbria's programme permits four issues and these must be before 2001. Each note will be fully underwritten by some or all of the five banks in the dealer group, which comprises the arrangers plus Banca dell'Umbria and Banca Monte dei Paschi di Siena. This makes the platform similar to a loan facility so the full cost of funding can be calculated. Zecchi, at Crediop, says: "Umbria was seeking a sure definition of costs and they wanted a commitment of funds. This put the issuer outside the normal Euro-MTN spectrum." Zecchi, at Crediop, explains the benefits of Umbria's facility. He continues: "In Italy the government requires that authorities make a budget forecast taking into account various costs. If an authority wants to issue debt, costs have to be indicated. But the market is changing and it is difficult to fathom what will happen in the future. With this type of instrument specific costs can be clearly shown." Umbria's need is specific. It must refinance the reconstruction work necessary after an earthquake in 1997. This is a huge project and Umbria's debt facility is large for the size of the region. As a result it requires certain funding safeguards and government backing. Farrell, at DePfa, is hesitant whether other issuers could use this type of facility. She says: "The programme was structured to meet Umbria's funding needs. There could potentially be other regions in Italy which could utilise a similar debt programme in the future but it is unlikely that it would be identical to Umbria's transaction." For now the borrower is only permitted to issue floating or fixed rate notes. But dealers say that once Umbria is established in the market, its programme could be adapted to allow more flexible issuance in private markets. A dealer from Chase says: "The programme at the moment doesn't foresee other usage beyond these four issues, but having said this, for lawyers to make amendments to allow for other types of issuance would be easy." Umbria's first issue was launched on December 20. The euro602 million 19-year note pays floating rate interest, but the issuer can choose to swap into fixed rate any time before 2001 when the note automatically swaps to fixed rate. Umbria will repay note holders using state funds it receives as part of its restructuring programme. The other three trades will be of a similar size, maturity and structure. The second issue is expected within six-months. Growth in the sector will bring steep competition. Umbria expects to receive an Aa3 rating from Moody's, but with three other Italian government issuers rated the same, marketing is crucial. That said, investors snapped up notes from Region of Marche's inaugural euro100 million trade in November, last year. And dealers report there are plenty of buyers eager for exposure to this sector. Farrell, at DePfa, says: "There is a high level of demand in the market for Italian regional issues as evidenced by the level of over-subscription for Region of Marche's issue. Demand for Umbria's paper is also expected to be strong, in particular given the attractiveness of the transaction structure."

JOINT ARRANGERS Chase Manhattan, Deutsche Bank (bookrunner) and DLJ have extended the deadline for sub-underwriters to join the jumbo £588m debt facility backing the leveraged buy-out of United Biscuits (UB). The facility is being syndicated under the name of the new company, Regentrealm. The sub-underwriting phase was due to close today (Friday) but the three leads have given banks another week to push the deal through credit.

The Euro-MTN market was destined for an exciting year with the launch of Emu in 1999. And it didn't disappoint. Total non-syndicated issuance grew 8098 and tickets sold in euros exceeded those in dollars and yen by almost $50 billion each. More corporates than ever accessed the investor base and trading began on-line. The market has set itself a high standard to live up to in 2000. Gavin Eddy, executive director, head of Euro-MTNs at Warburg Dillon Read (WDR), sums up the sentiment of the market. He says: "It's been an impressive year measured by any scale. It was a record year for growth and the development of the vanilla credit market has exceeded expectations. The market has proven to be resilient; many people expected the structured side to slow down a little, but that wasn't the case. It was a surprising year." The biggest surprise was the strong flow of business in the final quarter of 1999 - particularly since most dealers had expected trading to grind to a halt because of investors' fears of a millennium bug. Olivier Jalouneix, head of Euro-MTNs at Morgan Stanley Dean Witter (MSDW), says: "The pace of business from October to December was much higher than everyone expected. Investors closed their books very late, and liquidity was still good even at the beginning of December. The public markets slowed down quicker but this meant we could extend business in the private market." Of the total $343.56 billion-worth of non-syndicated debt issued last year, excluding self-led deals and issues off financially repackaged programmes (1999 review criteria), over $130 billion-worth was in euros, compared to $80.98 billion and $80.51 billion-worth of yen, according to MTNWare. Daniel Cogoi, head of Euro-MTNs at Paribas, says: "The extent that euro issuance exceeded that of the dollar was surprising. Everyone expected that euro volumes would be high, but not that the change would happen so quickly." However, some dealers report that it was difficult to sell long-dated euro notes in the private markets. Out of $66.99 billion-worth of euro notes (1999 review criteria), with a size less than $250 million, $30.89 billion had a term of 3 years or less, according to MTNWare. Jalouneix, at MSDW, explains: "There were relatively few plain vanilla euro-denominated private placement trades with long maturities. A lot of the new investors were insurance companies and pension funds which are not all yet familiar with the Euro-MTN format. In addition, the longer the maturity the closer issuers' levels need to be to those in the secondary market. Many issuers aren't willing to pay for long-dated senior euro-denominated Euro-MTNs." The increase in pension funds in the investor base was a trend picked out by other dealers. Eddy, at WDR, says: "There has been an upsurge in business coming from pension funds and life insurance companies. Many pension funds are making their first foray into the market and life insurers in Europe are interested in hedging annuity risk brought about by lower interest rates. Many are looking at MTNs, particularly structures, to achieve this." A true credit market began to emerge in 1999. As Emu removed FX plays investors increasingly turned to the credit spectrum in search of yield. Many single-A and triple-B names, such as FBA Icelandic Investment Bank, and a growing number of corporate borrowers, including DaimlerChrysler, Kingfisher and MEPC, were able to achieve attractive funding. Of total debt traded last year (1999 review criteria), 23.6:as issued by private corporates, private finance and private utilities. And the number of single-A borrowers accessing the market grew to from 16.4:n 1998 to 19.6:ast year (1999 review criteria). Simon Hill, head of Euro-MTNs at Credit Suisse First Boston, says: "A few years ago the market, especially structures, was dominated by a small number of triple-A and double-A issuers with not much below that until the emerging market issuers. This changed in 1999, as more investors relaxed their credit criteria. This is true of flow into Japan and Europe. Investors are looking for spread and they're willing to go down the curve to get it." But Cogoi, at Paribas, believes it is still early days. He says: "For a real credit market to develop there needs to be a critical mass of borrowers regularly issuing within well developed sectors, like telecoms and cars. We're still a long way off the US market." Business out of Japan not only came back from the depths in 1999 but exceeded expectations. Total non-syndicated yen issuance (using 1999 review criteria) topped $80.5 billion last year compared to $49.96 billion in 1998. Henry Nevstad, senior associate director, at Deutsche Bank is confident Japan's recovery can be sustained. He says: "The Japanese market accounted for approximately one-third of the total market for private placements in 1999. Although there are several political and structural changes taking place we'll continue to see the same levels of activity from Japan." As the Nikkei strengthened index- and equity-linked trades were among the highest in demand. Reverse duals and Bermudan callables were also popular. However the Japanese Ministry of Finance, in its attempt to increase transparency in the markets, introduced reporting standards and the marking-to-market of securities. Dealers think the result of this could be to turn investors away from structured trades. Sam Amalou, director, Daiwa SBCM Europe, says: "If structural risk is reduced investors will have to look at credit risk to pick up yield. This was evident last year and it will continue. We've had enquiry from life insurance companies for single-A names up to 10 years, which was rarely seen before." The sterling market surpassed its volumes of 1998, although not to the same extent as dollars or yen. But Fergus Kiely, head of Euro-MTNs at HSBC, says: "It was a highly successful year for sterling and I think it will continue to be strong in 2000 with plays into Europe. Investors will buy sterling to then swap into euros, gaining a pick-up on the basis swap." In the US the Financial Accounting Standards Board's (Fasb's) dreaded rule 133 affected Euro-MTN issuance by US borrowers. Although implementation is not due until June 15 2000 the thought of having to record all swap transactions on a quarterly basis was enough to keep many US issuers away from non-dollar trades last year. But Peter Jackson, managing director, head of Euro-MTNs at Salomon Smith Barney, sees two sides to the situation. He says: "There has been talk of the rule being adopted in other countries. Fasb 133 is draconian. It causes a lot of problems in the US, but in some cases it has helped Euromarket business, forcing issuers to borrow in ways that may not be the most cost-effective." For most larger issuers staying away from the market won't be an option. Joe Cousins, director, term funding, at Federal Home Loan Banks, says: "The system's accountants have spent a lot of time analysing the impact of Fasb 133. However, regardless of the accounting practice, our financial institutions have borrowing needs. This means we anticipate being active in the capital markets." Originators observed an increasing number of corporates signing in 1999. The trend continues for asset-backed facilities and guaranteed investment contract or gic-backed programmes, such as MassMutual and Allstate, both of which signed in June 1999. Europe was the main focus for newcomers. Scott Church, managing director, head of European money markets origination, at Merrill Lynch, says: "Consolidation of industries in Europe in the coming years will have a huge impact on capital markets and correspond

Trading in the third quarter of 1999 couldn't fail to shine compared to that of last year, when market turbulence silenced trading floors. Despite a summer lull, non-syndicated issuance topped the level recorded in the second quarter of 1999, making it the most active three months in over a year. But the stampede of trades predicted for September never materialised. Dealers are reassessing what opportunity might be out there. Henry Nevstad, senior associate director at Deutsche Bank (Deutsche), says: "The summer quarter has been relatively good, even though September turned out to be a little slower than generally expected. Many issuers seemed to have done quite a lot of pre-funding earlier this year to lessen their dependence on favourable market conditions towards year-end." And Gavin Eddy, head of Euro-MTNs, at Warburg Dillon Read (WDR) shares this view. He says: "In Europe banks and corporates have taken on the fact that the year will be short and have been keen to get business done early. Many issuers had such a large volume to do before year-end that they haven't had the luxury of waiting for the best opportunity." Total issuance of non-syndicated debt between July 1 and September 30 1999 was $103.31 billion, a marginal increase on the $102.11 billion sold in the second quarter and the $76.55 billion in the first, according to MTNWare. But this is a considerable amount more than the $65.04 billion traded in the third quarter in 1998. Last quarter saw 34 new issuers sign programmes, 22 of which arrived in the market in July, the busiest month for new signings in 1999. At the start of the year investors were cautious of risk and lower credits suffered. Confidence has returned, but a little slower than dealers hoped. Jens Nielsen, head of Euro-MTNs, at Barclays Capital (Barclays), says: "The beginning of the year was triple-A-land following the crisis in late 1998. It's noticeable how quickly people move on after a crisis in the market. The majority of investors are still looking a single-A or better, but they are generally much less risk adverse now." And Jon Saunders, head of Euro-MTNs, at Dresdner Bank, says: "There's definitely been a progression towards a credit market. A strong shift by investors from double-A banks towards single-A corporates has been seen as they go in search of yield." But progress is slow. Growth of a strong credit market was expected in January (see MTNWeek, 112), but issuance by triple-B borrowers never picked up in 1999. Fears that double-A's would lose out as investors rode down the credit curve have been calmed. Non-syndicated issuance by double-A borrowers last quarter was $43.86 billion - double that done by single-A's. Nevstad, at Deutsche, says: "The double-A sector looks set to remain the biggest and most active part of the market. Even though more and more investors are increasingly going down the credit curve for an additional yield pick-up, the majority of European investors still prefer double-A compared to all other rating categories." Though many dealers express disappointment at the performance of the euro, it has shown steady growth in 1999. In the last quarter non-syndicated issuance in euros stood above dollars and yen with $38.54 billion-worth traded. German and UK borrowers issued the most while US borrowers fell away from the sector. Nielsen, at Barclays, blames the Financial Accounting Standards Board for US issuers' lack of interest in the euro (see MTNWeek, issue 150). But US borrowers were quiet in other currencies too. And while Japan struggles to regain its hold in the market, European issuers are grabbing chances. German and UK issuers showed the greatest increase in activity in the third quarter. Saunders, at Dresdner Bank, says: "There have been a lot more UK and German issuers signing programmes so there's a lot more choice out there. There's been a lot of corporate activity in the UK and Germany." And dealers predicted that 1999 would be the year of corporates in the market. Non-syndicated issuance by private corporates has grown steadily since the first quarter from $3.42 billion to $5.92 billion in the third. But Fergus Kiely, head of Euro-MTNS at HSBC, says: "In terms of private placement opportunities, corporates' expectations have not been managed. Dealers have been advising corporate issuers to post levels too tightly and they have struggled to get paper away." In the last quarter appetite for structured trades fell. Dealers suggest concerns about the end of the year and market volatility are driving investors back to the safety of plain vanilla notes. But others highlight the constant maturity swap rate-linked note (CMS) as the darling of structures. Nevstad, at Deutsche Bank, says: "CMS is the one single mainstream structure which has seen the greatest demand so far this year. This structure, combining a guaranteed minimum coupon with a potential upside depending on the development of the yield curve, has proven to be very successful with retail investors." Kiely, at HSBC, thinks more originality is required. He says: "There's nothing new in structures. The same old ideas are just coming around again and tweaked when conditions are suitable. A bit like my dinner jacket being dusted down for an appearance at the right invitation."

Salomon Smith Barney Holdings has increased its Euro-MTN shelf from $2.5 billion to $6 billion.