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DEUTSCHE BANK has signaled its commitment to its M&A practice by taking Bob Cotter from Salomon Smith Barney in New York, Cotter was co-head of M&A at Salomon but will be head of Deutsche's global M&A practice. Deutsche Bank's M&A practice ranked 10th in the world last year in terms of announced mergers worldwide by dollar volume, but has dropped to 18th this year.

UK corporate, Diageo added a $1.5 billion US MTN facility to its financing arsenal on October 20, to access domestic retail investors (see MTNWeek, issue 153). Many European borrowers are keen to follow Diageo but this is a sector closely guarded by US issuers. And American buyers who traditionally look for top names could prove hard to please. Yet Diageo's $300 million fixed rate 10-year inaugural US MTN trade was announced within a week of signing. And the pricing level achieved was tight at 110 basis points over treasuries. Mike Turnbull, executive director and head of UK corporate coverage at Morgan Stanley Dean Witter (MSDW), the US programme arranger, says: "The issuer acted responsibly to ensure it introduced paper that investors wanted. But it was still able to achieve pricing well inside that of other single-A rated borrowers." Andrew Moorfield, director, corporate finance and capital markets at Diageo, has clear aims for the programme. He says: "Diageo wanted to increase the liquidity of its secondary paper and access second and third tier investors in the US. We hoped in signing the US facility we could diversify the funding base and our maturity profile, for example we had big gaps in the 2002 and 2003 maturities." But some dealers are sceptical as to whether US MTNs are a good option for non-US borrowers. One dealer says: "Many banks are not emphasising the yankee product to issuers, since rapid growth in the Euromarket is offering more arbitrage opportunities." And Ron Ross, director, debt capital markets at Merrill Lynch, says: "The advantage of issuing in Europe for European corporates is a lower fee structure than in the US." Diageo wanted a three- or four-year note for its inaugural, but found that the 10-year deal offered a better price and was what buyers wanted. Paper was sold to 40 retail investor accounts and half of the orders were for under $5 million, with one for $300,000. There are relatively few non-US borrowers with SEC-registered US MTN programmes, although it is steadily increasing. Northern Rock signed a $1 billion facility in May this year. Establishing a name in the market is the main concern for newcomers. Moorfield, at Diageo, believes the MTN trade was piggy-backed on the strength of Diageo's yankee and global bond issues which raised its profile in the US. He says: "There is a yankee premium for non-US borrowers but due to the frequency of Diageo's presence in the market and the success of its global bonds, the premium was diluted. European issuers should be encouraged to look at the market, which is deep and liquid - the premium could be worth it." Diageo was formed in December 1997 when Grand Metropolitan merged with Guinness. Among its many tasty products are Haagan Daz, Smirnoff and Burger King. Diageo, translated from Latin and Greek as everyday all around the world is an apt name, considering its extensive product distribution. Diageo's name may not be universally known in the US but Ross, at Merrill Lynch, believes its success in America is down to its brands. He says: "Diageo's main objective is to tap the retail investor base using the appeal of its well-recognised brand names." Despite being UK-based, Diageo's funding requirement is in dollars since the majority of its business is in the US. Moorfield, at Diageo, says that if the US facility meets the aim of investor diversification, then the ceiling will be raised and it will increasingly be used for funding instead of Diageo's $5 billion Euro-MTN programme. Yet Matthew Antoniou, debt capital markets manager at Diageo, emphasises this does not devalue the Euro-MTN shelf. He says: "Diageo's intention is not to be frequently accessing the market but to be a steady issuer off the Euro-MTN programme. It will continue to do relatively small trades and seek out discreet private placements, but always with aggressive pricing." Diageo has not ruled out trading in the Euromarket before the close of 1999. And Moorfield, at Diageo, says a $50 million US MTN will be issued in the next few weeks. Diageo sells itself as a flexible and sophisticated issuer, keen to meet investors' needs, which is crucial in the competitive US market. Antoniou, at Diageo, says: "Diageo is open to all structure ideas and will consider any type of note as long as the price is good. We can give an answer to our dealers within 24 hours." But Moorfield, at Diageo, adds: "Diageo is cash-rich and is not prepared to pay a premium to do a particular structure or lengthy maturity." Diageo had good demand for its first US MTN but if it issues more frequently it may have to compromise on levels, especially for short-dated deals. Yet Bob Bonefide, head of MTN and CP origination at MSDW in New York, says: "The US market is so large, deep and diverse it would be impossible for Diageo to reach saturation point. Even for GMAC and GE Capital, issuing billions of dollars-worth of debt, good pricing can still be achieved." He expects more European issuers will sign US programmes in 2000. Turnbull, at MSDW, says Diageo is equipped with a variety of funding vehicles in order to have flexiblity. He says: "Diageo is always reasonable in its expectations. Markets go in cycles and Diageo's pragmatic approach to funding means it won't dump money into a market that doesn't want it."

DLJ has hired a managing director from Salomon Smith Barney to head up its European telecoms and media group. David Diwik will start work at the London office in September. He will report to Joel Cohen, CEO of DLJ's European investment banking group, who is currently still based in New York.

Yesterday (Thursday), dollar swaps were trading very close to where they had been a week earlier. The 10 year mid-market was around 121bp over the 6.5% Treasury due 2010, while the five year was at 102bp over the 6.75% Treasury due May 2005. The 30 year swap was at 138.5bp over the long bond. Swap rates, meanwhile, are appreciably tighter. Yesterday, two year swaps were quoted as 6.98%-7%, against 7.1-7.12% at the beginning of the week. Five and 10 year rates were also about 10bp tighter, at 7.05-7.08% and 7.14-7.16% respectively.

Dow Chemical Company (Dow) has signed a $1 billion Euro-CP facility with Deutsche Bank as arranger. The dealers are Deutsche Bank and Citibank. It also has a $500 million Euro-MTN programme and two US CP facilities but has not issued off any of them to date. Dow is the second biggest US chemical company after DuPont and is in the process of buying its rival Union Carbide. The issuer's short-term ratings are P-1 from Moody's and A-1 from Standard & Poor's.

Competition in the Dutch housing sector is hotting up. When WSW signs its unlimited Euro-MTN programme in September (see MTNWeek issue 136) it will be the third debt facility for housing associations in the Netherlands. Dutch Housing Association Finance (DuHAF) signed a euro1 billion Euro-MTN facility earlier in the year, and in a crowded market is determined to stand out. But it has a battle on its hands. Valentijn Thijssen is the senior consultant in the treasury advisory group at DuHAF Holdings. He was pleased with the Euribor flat rate achieved in the inaugural trade, in June, and is optimistic that the next issue will be even tighter. He says: "It was not too sharp to scare investors but it was a good level compared with the local private placement market. It was important to show we can compete with these levels. And we are keen to prove that we can become cheaper." But Waarborgfonds Sociale Woningbouw (WSW) is chasing close behind. This programme is co-arranged by ABN Amro and Bank Nederlandse Gemeenten (BNG). WSW was founded in 1984 as a guarantee fund for Dutch housing associations. It guarantees the debt of 637 associations - 90% of the total number, including 13 within DuHAF's group. But while associations under WSW's facility will issue in their own name, notes from DuHAF's programme will be in DuHAF's name. A spokesman, at WSW, says: "Investors may view WSW as being in competition with DuHAF, because both entities will have Euro-MTN programmes. But we think the programmes complement each other, and that investors have a wider choice." Yet, Thijssen, at DuHAF, believes DuHAF's programme offers a superior service. He says: "One of our roles is informing the housing associations on how the market works. An association on its own would have to invest a lot of time to acquire the same level of knowledge that we provide. The BNG/ABN Amro programme is very different from our approach, because there is no central manager and information provider." Colonnade, the ING Barings arranged pass-through securities programme, offers further competition as a funding vehicle for housing associations. The facility was signed in April 1998, and two public issues of Fls325 million ($155 million) and $75 million were launched in June and November. WSW guaranteed the notes. DuHAF's programme is jointly arranged by Morgan Stanley Dean Witter (MSDW) and Rabobank International. Deborah Loades, Euro-MTN product manager, at MSDW, says: "There are three different methods for the housing associations to access the market. We believe the DuHAF route is the most attractive since it is the only one which combines the ability to issue opportunistically and strategically through a large, liquid issuing entity." In the early 1990s the central government privatized the social housing association system in the Netherlands. Until Colonnade and DuHAF signed facilities to issue in the Euromarket, the majority of funding for the associations had been met through the domestic private market. WSW has triple-A ratings from Moody's and Standard & Poor's. The same rating is applied to notes issued by the housing associations WSW guarantees, including those in DuHAF's group. A WSW spokesman says: "WSW is the safety net for investors. Investors don't have to worry about risk, or which housing association is more solvent than another, we take the burden." But, because WSW secures notes issued by so many associations, some more credit-worthy than others, it will not take the risk of complicated structures, swaps, or short maturities. DuHAF is restricted to issue only in guilders and euros and only notes longer than two years. Although it plans to negotiate better terms with WSW. It is increasingly important that DuHAF can offer flexible funding. Consolidation among housing associations is occurring rapidly and as the sector contracts and becomes more competitive DuHAF is keen to attract more associations. DuHAF only has its two arrangers as dealers but is open to reverse enquiry. DuHAF is owned by housing association shareholders so when it comes to closing a deal response times may be slow. Thijssen, at DuHAF, says: "If I have to round up lots of housing associations for a trade it takes more preparation and can be longer in the sorting out process." Although he goes on to say that if just one association is involved the turnaround could be within an hour. Eddy Villiers, head of new issues, Rabobank International, says: "The structure of DuHAF's programme is not the sort that will enable trades to come to market within a day. But the programme is for strategic not opportunistic issuance. The housing associations have specific funding needs and we have time to prepare and match investors' demands to those of the issuer." WSW has been delayed in signing its programme because there are several parties involved. But Douglas Grobbe, head of origination, Benelux, at ABN Amro, does not consider WSW will have any problems when it comes to trading. He says: "The housing associations are very used to the market. They have been issuing in the domestic market for many years and are used to the process. The only difference is that issuance comes off the Euro-MTN programme. It offers standardization for issuers and makes them more visible in the Euromarket." As competition in the sector increases it is possible that DuHAF, Colonnade and WSW will be forced to merge facilities to make issuance more efficient. However, Villiers, at Rabobank, thinks DuHAF's facility will be active and compete in its own right. He draws the comparison with other umbrella programmes. He says: "The bundling of the funding for municipalities or housing associations in this way will be extremely successful. It allows smaller entities to get greater status in the market and achieve better levels." And Thijssen, at DuHAF, shrugs off the challenge of competition. He says: "Apart from our zero solvency and our triple-A credit rating, DuHAF is an acknowledged and respected name. We can facilitate individual needs with small structured trades or with larger bonds, which we then split up, to get a better level for the issuers."

Croatia Lead arrangers Bayerische Landesbank (books), Citibank (books), Commerzbank (co-ordinator, books), Dai-Ichi Kangyo Bank (facility agent) and WestLB (documentation) have signed the Eu150m term credit facility for Zagrebacka banka dd.

Electrolux has redenominated its $1 billion global MTN programme to euro1 billion ($941.44 million). Credit Suisse First Boston and JP Morgan have been dropped as dealers while ABN Amro and Morgan Stanley Dean Witter have been added, alongside Salomon Smith Barney (see MTNWeek, issue 190)

Ecuador appears to have beaten investors into submission with its debt restructuring proposal to swap $6.65bn in defaulted Bradys bonds and Eurobonds for $3.95bn of new 12 and 30 year global bonds. After roadshows in New York and London this week, Ecuador was on track to attain the 85% investor approval it needs for the restructuring to go ahead. Ecuador's success, however, was more the result of coercion than negotiation. If 50% plus one of the current bondholders vote in favour of the exchange, then that will result in the dissolution of certain terms on the current bonds, making it a worse bet for bondholders who do not vote in favour.

Mexico ? Grupo Televisa SA

Erdoelbevorratungsverband (EBV) set out its stall in the private market last week, by issuing a euro25 million ($24.57 million) 30-year CMS-linked note. The borrower achieved a tight sub-Libor price due to its triple-A rating and status as a quasi-state entity. But with eight other German borrowers holding top ratings, competition is hotting up. EBV may have to be increasingly adventurous in its issuance to keep a foothold in private placements. EBV has been lucky in that investor appetite for its paper has been strong since it signed its euro2 billion programme on 13 September, last year. But its funding requirement off the facility in 1999 was low and it had the luxury of being able to wait five months for the right opportunity. Westdeutsche Landesbank (WestLB) was the quickest dealer off the mark with a trade for EBV. It was lead-bookrunner off its inaugural which will settle on September 29 2000. Hans Joachim Von Hanisch, head of Euro-MTNs at WestLB in London, explains why the deal was transacted so far in advance. He says: "The trade was driven by demand from pension funds in Europe which were keen to invest in the 30-year category and wanted forward purchase of bonds in September." Sanders Schier is on the board at EBV and is responsible for its financing. He says EBV will focus on the private market in 2000 since that is where he believes it will get the best levels. EBV has issued schuldschein for 21 years and intends to continue to rely on this source. As a result the funding target off its Euro-MTN shelf this year is relatively small at euro250 million, so Schier thinks a public issue would probably not suit EBV's strategy. He explains: "We have certain dates when refinancing is due but we know that it is unlikely investors will be there then. So we have a permanent buffer zone of euro100 million. If a dealer comes to us with a trade of up to euro50 million per tranche and it is an attractive offer then we will do it." EBV is responsible for importing, storing and maintaining emergency oil reserves within Germany. It was set up in 1978 by the government through its oil stockholding law because Germany is 98% dependent on imported oil. EBV doesn't need government approval for every note traded, but its link to the state does mean it is limited in what it can issue. Yet, borrower flexibility is essential as competition heightens and investors take the driving seat. Schier, at EBV, is aware that even triple-A rated issuers have to play into buyers' hands. He says: "For the time being we are limited to issuing in euros as a conservative approach. While targets can be achieved in euros we will continue to issue in the currency. But the programme allows for issuance in other currencies and I think this will be one of the next steps." Some banks are concerned that EBV is ignoring the potential for quality funding in other areas. An official at Deutsche Bank in Frankfurt, arranger off EBV's facility, says: "The tight pricing and the fact that EBV is restricted in the currencies and structures it is open to could be a problem. Japanese investors have shown interest in the name, but they can only buy in yen. EBV could play on many more possibilities but there is work to be done." EBV believes it will have no problem standing out from the crowd. Its state support makes it extremely stable since the law protects it from changes in the market price of its oil reserves and it is forbidden to ever sell at a loss or be bankrupt. Schier, at EBV, emphasises that EBV's debt is highly attractive to risk-adverse investors. Also, as a corporate, it offers diversification from the usual set of triple-A rated banks. He says: "EBV's 20% risk weighting in addition to Standard & Poor's triple-A rating, its government backing and the security of the law which does not allow EBV to go bankrupt, means it can position itself strongly in the market as a superior credit to compete with other issuers in its peer group." Triple-A rated Kreditanstalt fur Weideraufbau (KfW) issued $9.44 billion off 70 non-syndicated trades in 1999. Frank Czichowski, head of capital markets at KfW, believes that in a rapidly changing market borrowers can't afford to be rigid in their style of funding. He considers that KfW's success comes from being alert to market dynamics and being fast to react. He says: "There are more issuers coming to the market so competition is clearly growing. For triple-A borrowers providing liquidity for investors is one of the main issues. Speed and flexibility are also priorities. Often investors want to express a certain view on the market or want something specific. Issuers have to be quick in responding to these particular needs." One of EBV's aims is to increase its recognition in the market. Von Hanisch at WestLB, says: "EBV is keen to raise its profile and increase attention on its credit since it has an on-going need for private placements." But the new borrower did not use the traditional route of a public debut issue to get its name known so it has its work cut out. Yet Schier at EBV, has full confidence in his chosen panel of banks. He says: "We selected eight banks which we know have strong national and international coverage and can reach the investors we want to target. We are willing and happy to visit investors on an individual basis, but we think it is more valuable to concentrate on keeping up contact with dealers."

Eicsson's treasurer Vidar Mohammar gives his opinions on competion and online trading in the MTN market... Q. How has your borrowing strategy changed as the market has become more credit aware? A. Not really. Ericsson is pretty well known already. We are borrowing at much the same levels as we were a year ago. Q. How do you reassure investors about your credit? A. We have had the same rating for such a long time that it is not an issue. The market sees us as a pretty good credit. Q. How important is it to be a pan-European household name in selling your story? A. Being a household name absolutely makes life easier. Investors already know who you are when you go out and roadshow. Q. What percentage of your investors are non-domestic? And how does this compare to a year ago? A. The majority of our investors come from outside Sweden and this has not changed. Q. What sort of structures are investors interested in buying from you? A. They are interested in all sorts of structures but we mainly issue plain vanilla. If the pricing is right we will do equity-linked deals. Q. How do you feel about the market going online? Are you happy for your levels to be posted on a screen that everyone can access? A. We are happy to post our levels if we are issuing, but if we are not issuing it is a waste of time. Q. Do you think borrowers' relationships with their dealers will suffer as a result of online trading? A. It's just another way of issuing. It is not replacing other ways of issuing, it is complementing them. It is useful for reaching institutional investors. Q. How do you see the market developing in 2000? A. It will be more common to go online. This should push pricing down, which is good for borrowers and investors.