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UK blue chip British Telecommunications (BT) is close to wrapping up a group of banks to refresh its £16bn facility, signed in June this year. The new loan will be a separate facility, but follows the same pattern of a club deal, resembling a set of co-ordinated bilaterals. The new deal is a £18bn revolving credit, of which £12bn matures in 364 days, and £6bn matures in 364 days with a 12 month term-out option.

UK blue chip British Telecommunications (BT) is close to wrapping up a group of banks to refresh its £16bn facility, signed in June this year. The new loan will be a separate facility, but follows the same pattern of a club deal, resembling a set of co-ordinated bilaterals. The new deal is a £18bn revolving credit, of which £12bn matures in 364 days, and £6bn matures in 364 days with a 12 month term-out option.

Having top quality paper and a name to match, La Caisse d'Amortissement de la Dette Sociale (Cades), has spent the last two years providing a wealth of opportunity for the sophisticated investor. With the success of its global CP programme still a focus of attention, dealers are preparing market players for more of the same with the new debt issuance facility. Signed in June 1996, the first 10 days of trading saw $8.1 billion raised off the Ecu15 billion ($16.49 billion) Global CP programme. Outstandings off the facility are now Ecu4.14276 billion and this will be maintained. Taking advantage of the positive market feeling, the first Euro-MTN issue was made off the Ecu10 billion debt issuance facility on March 27th for Dm15 billion ($8.34 billion). Cades hopes to raise Ffr10 billion ($1.66 billion) under the MTN facility in 1998. When asked why Cades is one of the most successful quasi-sovereign issuers, Christophe Frankell, market operations officer at Cades, explains that the team there is used to large deals, big outstandings and high liquidity. He says: "We have very popular paper because we pay attention to what the market wants. We issue what the market wants us to issue. We then transfer this into a structure that fits our own needs. We have great flexibility." Set up in January 1996 as a public agency with the purpose of paying off the cumulative debt of the French Social Security system, Cades has the objective of amortising that debt by 2014. As such, Cades is viewed in the market as offering French government risk and carries triple A ratings from Moody's and Standard & Poor's. It has a BIS ratio of 0%. The government guarantee given to the agency itself means that there is an implied guarantee for Cades' paper in the public bond markets and the shorter dated CP and MTN markets both in America and in Europe. The fact that Cades can deal in a variety of currencies before swapping them back into French francs adds to its flexibility. The investor base for Cades' paper is already broad and expanding with each issue. Those with most appetite are typically central banks, treasuries and mutual funds. The flexibility referred to by Frankell reflects the freedom to make funding decisions granted to Cades by the French government. He says: "We are very progressive when it comes to the complexity of deals. The only restriction for us is the capacity of our middle and back offices to do the deals. However, we do need to manage the kind of risk that goes with structured deals." Lehman Brothers, which won the mandate for arranging the MTN facility after the success of its arrangership of the global CP programme, is convinced of Cades' ability to respond to market demand. Martin Goldberg, executive director, fixed income at Lehmans, comments: "Cades is likely to be tested soon on complex structures in the light of their credit and their reputation as a sophisticated issuer." Although the MTN facility is expected to be more active in terms of new issues this year, the two facilities are seen very much as complimentary by Cades. It will also continue to maintain its presence in the syndicated bond sector and the USCP market. The willingness and ability to be creative in terms of structures also is applied to Cades' acceptance of ideas from dealers outside the groups for both programmes. In recognition of the increasing competition among dealers, Cades is not only open to reverse enquiry but encourages it. The ability of dealer-placed MTNs to meet specific investor demand for unusual maturities will allow Cades to fill maturity gaps such as 2003 and 2009. The team at Cades is made up of six key people: three in the front office and three in the middle and back offices. With such a small staff it makes sense that there is no separation of responsibilities. Everyone is familiar with the activity in the Euro-CP market, the Euro-MTN market and the bond markets. The operation has worked well so far but, as Frankell agrees, time will tell if this will remain the most efficient way of operating once the MTN facility begins to flex its muscles. The future for Cades looks full of promising new funding opportunities. With both programmes denominated in Ecu, the issuer is determined to build on its reputation as a supplier of liquid, well priced quality paper. Although the team at Cades relies predominantly on its dealer group for advice on structures, it is keen to widen its own skills base to take advantage of new opportunities and an even broader investor base. The preparations for the market post Emu are well under way. Frankell explains: "About 70% to 80% of our issuance is in dollar. Next year the euro will change this proportion. What will be important is the Euro-CP market in euro. It is a very good opportunity for the CP market to develop. Cades will be there to take advantage of this when it comes." According to Goldberg at Lehmans, Cades should be ready, willing and able to create opportunities in the new Europe. He says: "Cades has a well respected funding team. They have done a great job of managing a big portfolio of debt in a short time frame with a relatively small staff. They tend to listen to their dealers and address any problems that arise."

The Winnipeg Sherriton is a hotel with which many Euro-CP and Euro-MTN experts are familiar. Not only is it positioned on Canada's supposedly windiest street corner but it is also the best place to stay when paying a visit to the Canadian Wheat Board (CWB). And it is well visited. For intermediaries CWB is a name which instantly increases street credibility and it is a must for every Euro-CP investor's portfolio. "The Canadian Wheat Board's Euro-CP programme is very well regarded in the market as it provides investors with the rare opportunity to get exposure to Canadian sovereign risk in a variety of currencies. It is the type of programme which is very attractive to the major Euro-CP dealers," says Conor Gallagher, vice president at JP Morgan. The programme was signed in 1996 and with $1.4 billion in outstandings, it's close to touching its $2 billion ceiling. It's an ongoing facility and obviously, frequently used. CWB also has a $2 billion Euro-MTN facility which was signed three years earlier but, with only $403.55 million outstanding, it's clear where CWB's main focus rests. Gordon Menzie, director, treasury operations explains: "The CWB's Euro-MTN programme may not be as visible as the Euro-CP programme since it is used more on an opportunistic basis." CP is traditionally used as a stepping stone into the MTN market, but this has not been the case with CWB. Its original plan was to first do a Euro-CP and then a Euro-MTN programme but the Euro-MTN market was experiencing a growth phase at the time of signing. According to Menzie, it was possible to achieve around 70 to 80 bps in swap-rates. The market was also favourable since structured transactions were popular. There were only one or two other Canadian crown agencies in the Euro-MTN market in 1993 which gave CWB another reason to tap the market. Overall, there were better opportunities in that market at the time. The arranger of the Euro-CP programme is SBC Warburg Dillon Read whilst Merrill Lynch arranges the Euro-MTN facility. But it is clear that the success of the Euro-CP programme is down to both a sophisticated and focused approach by CWB. Menzie says: "We didn't rely on our arranger to paint a picture of the market and direct us. We knew what it was that we wanted to do and it was more a matter of CWB researching the market and then selecting the dealers." The dealer groups on each facility also show little overlap. Menzie says: "For all our dealers, we look at the value-added which they bring and their contribution to the market." There is the option for reverse enquiry on both programmes but to-date it has only been applied to the Euro-MTN. The Euro-CP programme is used more for core funding and so requires a different approach. The theory is that if there is a clear commitment to the dealer group, this will be repaid by a clear commitment back to the borrower. When asked if the forthcoming affiliation between SBC Warburg Dillon Read and UBS will provoke any changes, Menzie points out: "We're not knee-jerk reactionary about mergers. Our reaction will depend on the merged entity's commitment to the market." One thing is clear, CWB is run by some pretty level-headed people. The funding operation is made up of a team of four: one looks at off-shore funding in Euro-MTNs and one at Euro-CP; one looks at the US MTN & CP market out of New York; the other looks at domestic Canadian CP & MTNs. Each is responsible for their own market. Together they try to remain sensitive to the pricing intricacies of each market and price with them in mind. According to Menzie, the team stays aware of CWB's all-in costs but when they can arbitrage between markets they do. "We hold meetings each day to look at strategy and our priority is to go for the market in which we achieve the lowest cost and our best access to capital," says Menzie. Funding-wise CWB is a crown agent and the paper carries the guarantee of the Canadian government. This means CWB has the same ratings as the sovereign: AA+/Aa2 for long-term and P-1/A-1+ for short-term debt. But CWB is a complete stand-alone agency with its own mandate in operational matters. Menzie explains: "We manage it how we see fit. There are no day to day or month to month demands from the government." The only obligation which CBW has is to issue floating rate assets. For Euro-CP, there are two annual portfolios one for C$2 billion - C$4 billion and another which is more static at $3.5 billion - $3.6 billion. Once these levels of core funding have been achieved then the market is looked at more opportunistically. Because CWB is such a safe bet, its investors are typically the central banks since they are interested in high quality, low risk, sovereign-status paper. One of the original aims of the Euro-CP programme was to create for CWB a well established name and to diversify its investor base outside of North America. Both of which they have successfully achieved. The Asia crisis has undoubtedly had some effect on the market although in which way is still too early to tell. As a result, officials at CWB are undecided as to whether they have seen a flight to quality or whether the crisis has highlighted a weakness in the Canadian dollar and caused a flight to dollars instead. Whatever the outcome, CWB looks well-placed to remain one of the Euro-CP market's busiest and best regarded borrowers.