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Given the current confusion which the market is experiencing, both post-Asian crisis and pre-European Monetary Union (Emu), it seems that some market participants resemble tourists without a map. That the number of surveys circulating the market is unusually high can be attributed to the current state of nervousness. And although MTNWeek's survey asks many questions which require issuers to take a well reasoned guess, it is comforting to have a guide on the road to enlightenment. Investors & currencies Participants in last year's survey expected the bulk of demand for their paper to come from Japan. The Asian crisis has had a helping hand in putting paid to this, and issuers coming to the market this year are expecting to see stronger demand coming from Europe than in previous years. Of course, this is linked to Emu. Since the Asian crisis, issuers have learnt that it is too risky to rely on one market alone. Prior to the crisis, many issuers took the same view as MTNWeek when, this time last year, it reported: "There is no reason to expect Japan's affection for MTNs to end in the near future." Recent events have ended this misconception. Those borrowers who did not before, now know better. Participants in the MTN market survey expect to place greater emphasis on European currencies in 1998 than they did. The popularity of southern European currencies, particularly lira and escudo, will probably rise, continuing what has become a noticeable trend over the last two years. Some of the other European currencies which are expected to see good appetite are Swiss francs, sterling and the Benelux currencies. Although not a European currency, demand for Canadian dollars is also expected to increase as the failure of yen, relative to expectations, leads more borrowers to search further afield for value. Many of the supranational borrowers which participated in the survey have predicted a growth in demand for the more exotic currencies, although it is worth noting that they tend to be more active in the public bond market than in non-syndicated private placements. Polish zloty, Greek drachma, Czech koruna and South African rand are some of the currencies which have been suggested as receiving more interest in the coming year. In the mean time, a large number of borrowers are still showing interest in yen and the dollar looks set to continue to be a driving force. Non-Japan Asia is also tipped to be popular. MTN funding Although outstandings for non-syndicated MTNs are rising and in 1997 they totalled $210.6 billion as opposed to $150.7 billion in 1996, Figure 1 shows that borrowers are still not using an MTN programme to fulfil all their funding needs. Perhaps the MTN programme has gotten itself too opportunistic a reputation to be considered for such unglamorous work as core funding? According to the survey, over the next year an average of only 38.5an issuer's funding needs will be met through an MTN programme. This is approximately equal to last year's 40 Whether the Asian crisis has had the effect of dampening issuers' demands for funding through MTNs in 1998 is unclear. Traders have been complaining that due to the crisis, there was a dearth of deals in February but the figures do not paint as black a picture. In February 1998 there were 542 non-syndicated MTN issues totalling $17.4 billion compared with 686 issues totalling $17.8 billion during the same period in 1997. It is possible that some issuers have put their plans to fund in MTNs on hold until the situation in Japan becomes more stabilised. Yet with programmes like that of CADES' being signed, off which CADES hopes to achieve all its funding targets, borrowers' attitudes may change. Borrowers may be encouraged to use MTNs less opportunistically and more for core funding. Calls from dealers The number of issuers who said they do not receive enough calls from dealers is surprising. It has gone up from 16o 22.6ince last year's survey. That said, an enormous 145 programmes have been signed since issuers were last polled. Maybe the sheer number of borrowers who now have an MTN programme means it is difficult to call all of them. The number of issuers surveyed who receive too many calls is significantly smaller than last year. Given the current vogue of consolidation in the market, can we expect to see dealers spread increasingly thinly over a growing market? Issuers & dealers This time last year, MTNWeek predicted there would be a sweeping trend for reverse enquiry. Yet looking at Figure 2, this does not seem to have been the case regardless of the fact that some big names, such as the World Bank, dropped their dealers last year. Ten percent of issuers carry out less than 20their deals through their dealer group. Last year, 15issuers polled did less than 20hrough named dealers. There are still borrowers who do 100their business through the dealers named on their programme document. What should also be noted is that for a borrower to be able to rely on reverse enquiry alone, the most important qualification is an outstanding name. Salomon Smith Barney heads the table of Top 5 reverse enquiry dealers for the second year running, winning 19.35votes compared with 9.9ast year. Last year Japanese firms dominated this category. Presumably they have been hit by the continuing fall-out from the ever significant Asian crisis. This year Japanese banks accounted for 25the overall vote but only one, Nikko, appeared among the top five with a 1igher vote than previously. Thirty two banks in all received votes in the reverse enquiry category, including names as varied as First Tennessee, Kokusai Europe, Svenska Handelsbanken, Wako and Zenshinren. Given frequently voiced concerns over the move towards bigger and fewer banks, it seems the less well known names still have much to offer. The most innovative dealer is Morgan Stanley Dean Witter, which is to be expected since it won the title last year. Also retaining its position, albeit in second place, is Merrill Lynch. Salomon Smith Barney is a new face in this table and has been popular with those surveyed this year, being the only bank to appear in the top five in all three categories. Merrill Lynch has again been voted the most active dealer group dealer, repeating last year's achievement. The bank featured as a dealer on a total of 76 MTN programmes signed last year. Salomon Smith Barney appears in the table of Top 5 dealer group dealers which does raise a few questions since it is absent from the League tables of top ten programme dealers and arrangers. Looking at the tables as a whole, the number of US banks which feature is still as high as last year, if not higher, helped by the inclusion of Salomon Smith Barney. Paribas is an eye-catching name to appear in two of the tables. Last year it just missed the top five in each category but was included in the Best of the rest. Featuring in this year's Best of the rest are Deutsche Morgan Grenfell, IBJ and UBS. Where will they come next year?

The MTN programme has come of age. In doing so it has shed its image as purely an opportunistic funding vehicle. This is according to the third annnual MTNWeek issuer survey. Large numbers of issuers are relying on their MTN programmes for core funding purposes. This year more issuers than ever were polled from a cross-section of the market. Supranationals, sovereigns, government agencies, banks and corporates are all represented. So too are the triple-As, the unrated, the market veterans and the MTN novices. Issuers have named their favoured dealers and have spared no blushes. In doing so, they have shown that what's important to them is distribution capability and the ability to cater for individual issuer needs. Having experienced a tough funding environment created from financial chaos last year, the issuer of 1999 is a tougher, more sophisticated one, ready for competition. Investors & currencies Almost every single issuer polled believes a big chunk of its funding will come from Euroland this year. Only two years ago the 1997 issuer survey led MTNWeek to conclude that issuers were becoming overly reliant on Asia - how things have changed. Japan is mentioned only in passing this year and one borrower sums up the feeling: "Asian investors are defensive and difficult to predict at the moment." A US issuer is more optimistic, however, saying: "Renewed interest is likely from all investors as rates rise in the US." It is not surprising therefore that both the euro and the dollar are more popular than yen amongst borrowers. The Swiss franc is the fourth most popular currency. Unsurprisingly parochialism is a noticeable trend with Swedish krona appealing to Swedish borrowers, Canadian dollars to Canadian borrowers and Australian issuers picking out the Australian dollar as their preferred currency. MTN funding Is this the year when issuers will use their MTN facilities for the majority of their core funding needs? Figure 1 shows that though only a handful of issuers intend to raise 100their funding needs through the MTN market, there are large amounts of issuers that rely heavily on MTN programmes. An average of 52issuers' funding will be achieved through MTN programmes this year. This is a significant increase on the last two years when the figure was 38.5 nd 40 respectively. This is reflected in the volume of outstandings in the market, which continues to shoot up. There is $123 billion-worth of non-syndicated debt outstanding since January 1. Issuers and dealers Reverse enquiry has failed to make the impact on the MTN market that most experts predicted this time last year. Figure 2 suggests the dealer group is alive and well and that many borrowers use their dealer panel to conduct 100their business. Only 6borrowers carry out less than 20their deals through their dealer group. Last year, 10borrowers did less than 20$hrough named dealers and in 1997 it was 15issuers. One issuer vehemently disagrees, however, and says: "The dealer group has almost gone the way of the dodo bird. Who is in our dealer group is quite frankly academic." Indeed his point is backed up by the fact that 41 banks in total received votes in the reverse enquiry category, compared to 32 last year and 24 in 1997. Mergers may be leaving the market with fewer houses but there is evidently still room for niche players. Names as diverse as Caboto, Zenshinren, First Tennesee, Fortis Group and Handelsbanken all get a mention. Whether these smaller houses get pushed out by the consolidation sweeping the market remains to be seen. For the third year in a row Salomon Smith Barney has emerged as the clear leader in this category. However Paribas, which came in at number two last year has failed to reach the top five in this section. Indeed, Paribas is conspicuous by its low profile in the survey. Another surprise is the re-emergence of Nomura as a heavy-weight reverse enquiry dealer. After last year, when it failed to appear in any of the tables, it has recaptured some of its form that made it so successful in 1997's survey. Morgan Stanley Dean Witter has once again won the dealer with the most innovative structures poll following its win in 1998 and 1997. Merrill Lynch, repeats its second-placed ranking of the last two years. And Credit Suisse First Boston makes its first show in the MTNWeek's issuer survey coming in fourth place in the innovative structures category. Merrill Lynch has managed to consolidate its presence at the top of MTNWeek programme dealer league tables by winning the most active programme dealer for the third year running. This year, however, it faced stiff competition from Deutsche Bank, which did not appear in last year's survey. The top five programme dealers indeed make up the top five banks in MTNWeek's programme dealer league tables. In this year's survey we asked issuers to name the banks with the best distribution in the market. Despite Salomon Smith Barney heading both of this week's issuance league tables it just misses out in this poll. Merrill Lynch received the most amount of votes followed by Deutsche Bank. The similarity between this table and the programme dealers table suggests that distribution plays a strong part in decision making process of issuers. League tables How banks prove their distribution capabilities to issuers is another matter. And however much dealers dismiss league tables as an irrelevance, it is crucial to note that 65issuers said league tables are important or very important. One borrower says: "Obviously a bank's experience is important but we always look at league tables when judging a dealer." And of the 35issuers who claim they never looked at league tables all but two proceeded to name their favoured table. The vast majority of borrowers think issuance league tables more important than programme arranger and programme dealer tables. However, it is noticeable that issuers new to the market this year are the biggest supporters of programme arranger and dealer tables. Tables such as these can be crucial in helping novice borrowers make up their minds about their arranger and dealer panels. What deals should be eligible for an MTN issuance league table provoked controversy among issuers. Seventy three per cent of those polled said that they believed only deals of less than $250 million should be included in a league table. This backs up MTNWeek's decision of last week to place a cap of $250 million on the non-syndicated deals league table. However issuers disagreed over whether to include financial repackaged deals, self-led deals and issues of less than a year. Only a handful of issuers believe that deals for special purpose vehicles should be included. Most are those issuers classed as financial repackaged borrowers by MTNWare. Even less people thought that deals of under a year's duration should make it into a MTN issuance league table. One issuer says: "If you include three- or six-month deals that's just cheating." Another issuer said of self-led deals: "It is such an easy way for a dealer to put themselves to the top. If you could prove that self-led deals made up less than 20their business, for example, then I would include them." Other issuers suggest the degree of structure should play a part in the league table while many issuers believe dealers which are specialists in public finance debt are not necessarily specialists in corporate debt, for example. One corporate borrower asks: "Do they have access to the investor base we need or the skills set to meet our needs?" It looks like the dealers that offer their issuers specialist and individual treatment will continue to appear prominently in MTNWeek's issuer surveys. Thi

John Hancock Global Funding II has signed a $5 billion global debt issuance programme via Credit Suisse First Boston. The dealer panel comprises Goldman Sachs, Lehman Brothers, Salomon Smith Barney, Signator Investors, UBS Warburg and the arranger.

JP MORGAN is recruiting 14 equity capital markets bankers in a bid to become the leading bank for equity issuance on the Neuer Markt. The US bank's new arrivals are from Dresdner Kleinwort Benson and will form a team dedicated to the German high-growth exchange.

On February 1, Dresdner Bank launched what may be one of the largest debt programmes ever. Market participants predict that K2 Corporation (K2), a structured investment company, will play a significant role in bringing more liquidity to debt markets and access to global credit markets for investors post-Emu. K2 promises to provide investors with high risk-adjusted yields by managing a portfolio of assets with an average rating of double-A, in which market risk is eliminated. Finance for the investments will come from both the Euro- and US CP, and Euro-MTN and US MTN markets. The limited purpose investment company signed four $6 billion programmes, which have a cumulative capacity of $20 billion. The notes carry ratings of A-1+ and P-1 for short-term debt, and triple-A for long-term debt from Standard & Poor's and Moody's, respectively. Dealers have been eagerly awaiting the launch of K2 since mid-1998 when the vehicle was set up. However, the nine-strong structured credit investment (SCI) team at Dresdner Bank, which manages the conduit, believes the delay was necessary given market conditions. Alan Harley, co-head of SCI, says: "We needed to get our team together before the launch. At the same time we had to work on the structuring and legal side, while building the systems and operations infrastructure." SCI was fast off the blocks once the go-ahead was given and its transactions in the CP markets this week went to hungry investors. Harley, at SCI, says that because the aims of the limited purpose investment company are long-term, K2 will woo investors by issuing short-term paper first. He explains: "The initial aim is to generate liquidity for the name. That means we'll initially focus on the US CP and Euro-CP markets." The importance of this strategy is underlined by Karen Pelham, executive director at Goldman Sachs, arranger for both the Euro-CP and Euro-MTN facilities. She says: "This will create visibility for K2 paper and generate name-recognition in the market. K2 can be flexible as to when to term-out the funding requirements in the MTN markets. This means it can keep its options open." As regards why Merrill Lynch was chosen to arrange the American programmes, and Goldman Sachs was picked for the Euro- programmes, Paul Clarke, Harley's co-head at SCI, says they are the leaders in both markets. He adds: "We also have major relationships with them when we're buying assets. Having them as arrangers completes those relationships." The SCI team is also eyeing issuance in MTNs in the coming months. Harley says: "We are targeting to issue approximately $3 billion of debt this year. If one-third of that is in MTNs, we'll be very pleased." As a relationship-building product for Dresdner Bank, K2 forms a crucial part of its strategy to expand its credit business. The vehicle is seen to be filling a niche for investor demand for this kind of structured programme. Pelham, at Goldman Sachs, says: "These programmes offer a consistent supply of quality paper and the issuers are in the market regularly. They're very flexible about currency swaps and maturities, always willing to accommodate investor demand. People are also very confident in K2's rating." K2 follows such success stories as Citibank Credit Structures' (CCS), conduits Alpha, Beta and Centauri. As ex-CCS employees, Harley and Clarke believe they have created the most advanced vehicle of its kind. K2 uses the latest techniques of asset securitisation and portfolio management. Clarke says: "We both managed the early companies like Alpha Finance, which was established in 1988. Then, securitisation technology was in its infancy and knowledge of credit-risk management was limited. We went on to launch Centauri and gained experience along the way. Now we're launching K2, a second generation company and a refinement of Centauri." Pelham at Goldman Sachs, points out that each of these companies meets different investor demand in a growing market. She says: "The market for credit funds is far from saturated and each fund has its own characteristics. K2 is not cannibalising the market but expanding the investor base." The SCI team are committed to marketing K2 both as an investor and an issuer of high quality debt, and its portfolio is planned to grow to more than $15 billion. It's intended to be evergreen, with an 11-year extendible life. Its short-term paper is said to be priced between Libor-5 bps and Libor-10 bps under its CP facilities but the SCI team are reluctant to be specific. Clarke says: "It's important to place debt at the right levels and let investors understand the credit. These businesses are quite well understood as is our track record. There's probably a shortage of money market paper from vehicles managed by Dresdner Bank. As a high quality name, that should help K2's distribution." Joining Goldman Sachs in the dealer group off the Euro-CP facility are Barclays Capital, JP Morgan and Warburg Dillon Read. Euro-MTN dealers are Dresdner Bank, JP Morgan, Merrill Lynch, Morgan Stanley Dean Witter, Nomura, Warburg Dillon Read and the arranger. Dealers off the US CP programme are Goldman Sachs, Lehman Brothers, and the arranger. These houses are joined in the dealer group for the US MTN programme by Warburg Dillon Read.

WESTLB and Roth Capital should complete the first simultaneous Nasdaq and Aim listing next week. The $46m-$55m IPO of Keryx Biopharmaceuticals was due to close on Tuesday, but has been postponed and will be completed imminently, a banker close to the deal said. The deal was complicated by the fact that conditional dealing - when a institution can sell its shares before it has received its share certificates - is permitted on Nasdaq but not on Aim.

Korea Electric Power has added Merrill Lynch as an arranger off its $1.6 billion Euro-MTN facility. Lehman Brothers has been dropped as a dealer.

CITICORP International, Deutsche Bank, Dresdner Kleinwort Benson and Standard Chartered have launched the $200m dual tranche facility for Industrial Bank of Korea. Following the spate of one year deals for Korean banks in late 1999, the borrower is picking up on this year's trend for three year money. Hana, Kookmin, KorAm, Shinhan and H&CB are either syndicating or have completed deals with three year maturities, showing the improvement in investor sentiment for medium term Korean debt.

Lafarge has upped the ceiling off its Euro-MTN shelf to euro3 billion ($2.86 billion) from euro1.5 billion.

In a Europe where currency arbitrage has all but disappeared since the advent of the euro, investors are forced to look elsewhere for good returns. One option available to them is to tap into credits from emerging markets. Despite the crisis in Brazil, investors are keen to consider Latin American credits as a good alternative to mainstream investment-grade borrowers. According to Andrew Dell, director, debt syndicate at ING Bank, the uncertainty surrounding Brazil has not spread across the continent quite as much as was first feared. He says: "Latin America has always been the bedrock of emerging market business and it still sees some good flows. The region is attracting demand from focused investors." Dell explains how the interest in Latin American borrowers is part of a wider focus on credit. He says: "Despite the various shocks experienced in Asia, Russia and to a lesser extent Brazil, there will always be demand for higher yielding assets. There will be enhanced interest in emerging credit stories, especially given the low returns available in core developed markets." However, the number of Latin American borrowers active in the Euro-MTN market has contracted because of the financial turmoil in Brazil. According to MTNWare, $15.41 billion was issued from Latin American borrowers off 228 issues in 1998. This compares to $16.58 billion in 1997 from 323 issues. Investor demand is selective and favours only those borrowers considered to be relatively safe bets. Those borrowers most active are sovereigns, like Republic of Argentina, quasi-sovereigns, like Petroleos Mexicanos (Pemex) and top rated corporates like Telefonica de Argentina. Many of these borrowers are waiting for spreads to come in before issuing. Dell, at ING Bank, warns that they can't wait forever to access the market. He says: "Issuers have to be realistic about pricing. They should look at what secondary levels are being offered and price accordingly. They should also be accommodating with structures to make sure the investor is always adequately rewarded for the various risks." Minimising the risk associated with borrowers from the sector is vital for attracting investors in 1999. Carlos Mauleon, who is in charge of debt capital markets for Latin America at Lehman Brothers, thinks issuers' Euro-MTN issues should incorporate structures like options, puts and exchangeables to add flexibility. He says: "Issuers as well as investors have become familiar with these structures and are better able to price them. Embedded options or warrants provide investors with an additional incentive or kicker to purchase the securities." It is also important for these issuers to take advantage of good opportunities wherever they originate from. One dealer says: "Latin American issuers have got to be agile. They must be prepared to be ready to come to market on a reverse enquiry basis." Likewise, investors are advised not to dismiss emerging market borrowers too easily. One market participant says: "Investors should be aware that there are a number of Latin American borrowers willing to issue. So they should be prepared to consider any of those that suit their portfolio." Not all Latin American borrowers have had to tiptoe through the international capital markets. Mexico has remained somewhat insulated from the Brazilian crisis. Richard Ludington, head of emerging markets syndicate desk at JP Morgan, says: "Mexico has disassociated itself from the rest of Latin America to a large extent. This is due in large part to its close links with the US economy, which continue to be strong." This has helped Mexico's state-owned integrated oil company, Pemex, to maintain its strong position in the Euro-MTN market as a safe emerging markets credit. It has $3.21 billion outstanding off 8 issues made since it signed its $1.5 billion Euro-MTN in February last year. Ludington, at JP Morgan, says: "Sovereign bonds from Mexico have been relatively scarce in the international capital markets in recent months. Pemex has been able to take advantage of this to service its large funding needs." Pemex' funding strategy has changed since it set up its Euro-MTN facility. Ludington explains: "Traditionally Pemex has accessed the market as a standalone issuer but to some extent, it was held hostage to Mexico's status as an emerging market. "However, it has now issued two major securitized transactions which has enabled credit rating enhancement. Pemex has thus been able to tap tighter spreads as a result. This is a material change in its funding strategy." Latin American issuers are encouraged to look to the Euro-MTN market as a source of funds and, with market volatility continuing, those borrowers which have an MTN programme in place will be better positioned to access it quickly. This advice is relevant for both sovereigns and corporates. However, Mauleon, at Lehman Brothers, also points out: "Most Latin American corporates with the exception of YPF, Cemex, Telecom Argentina and maybe a few others, tend to fund via stand alone issues. One of the constraints for the development of a larger MTN market for Latin American corporates is secondary market liquidity." This is all part of the general evolution of global investor demand for lower rated credits. A trend has developed showing a significant increase in demand for notes with optionality or warrants.

Argentina Lead arranger Barclays (Miami) has completed an $80m loan style FRN for first time borrower Banco Bisel of Argentina. The two year deal, which is for general corporate purposes, was oversubscribed and increased from $70m. The margin is 250bp over Libor and upfront fees are 37.5bp for $15m and above, 25bp for $10m-$14m and 15bp for $3m-$9m.