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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.

THE LEBANESE Republic raised $250m this week via Morgan Stanley Dean Witter by tapping its existing $400m October 2009 issue launched last year. Rated B1/BB-/BB-, the deal was priced at 99.125 paying a coupon of 10.125% and a spread of 438.5bp over Treasuries.

EIGHT bankers from Robert Fleming have found a home at Lehman Brothers. The team will join Lehman's flourishing consumer group to add weight to its food sector coverage. John Spayne, Anthony Gahan and Tom Lindsay join as executive directors. Andrew Brindley will be a director. Moving with them are three associates and an analyst. "Our business has been thriving since we started," head of consumer group Ludovico del Balzo said, "and we wanted to expand our food coverage. There were a number of firms talking to them and we had to move fast."

MACROPORE, a manufacturer of bone implants that are resorbed into the body once the bone has healed, has chosen to list on the Neuer Markt rather than Nasdaq, despite being based in San Diego, California. "They think it is a better stock exchange," said a banker close to the deal, "and they will get more attention." The company is expected to raise between Eu50m and Eu70m with its IPO.

As Euro-MTN outstandings pass the $1.6 trillion mark, and the number of new borrowers joining the market increases every year, the need to identify top market players is crucial. But to assess which banks and borrowers are really responsible for doing quality business, it's important to focus on MTN trades, as defined by MTNWeek's league table (see back page). Research included MTNWare and CPWare data, issuer and dealer opinion and pitches from the top 15 banks. BEST EURO-MTN HOUSE OF 1999 This award was a very difficult choice, with Morgan Stanley Dean Witter (MSDW) proving to be SSB's closest rival. It's been a challenging year for the market with the euro coming at a time when Japan was taking steps to recovery and Russia's collapse ensured a flight to quality. But SSB became a truly global market leader. It topped both of MTNWeek's league tables until mid-October and continues to hold the top spot in terms of number of issues. League table manipulation in the public markets which occurs around year-end can affect MTNWeek's tables in relation to one-year trades. SSB is number one when the table is run for trades with terms greater or equal to three years. These figures are vital supplementary information to the league tables for assessing which banks deliver quality funding to borrowers across the maturity spectrum. Thanks to its successful merger with Nikko and Citibank, SSB has an unrivalled global distribution capability and ranks top of MTNWeek's league tables for yen distribution with over $6 billion transacted off 426 trades. Its nearest rival is Nomura Securities with 273 trades amounting to $3.8 billion. With Nikko's retail distribution in Japan, SSB is the only non-Japanese house which is viewed as a domestic player in this crucial market. SSB is consistently strong in the three main currencies of euros, dollars and yen but other banks fare well in niche markets. MSDW is top for euro distribution. Merrill Lynch is number one in dollars. And Nomura Securities wins the structures table which excludes FRNs, zero coupons and fixed rate deals. SSB is ranked third after Merrill Lynch. A successful MTN house needs to offer the full range of services to issuers so although programme arranger and dealer league tables do not reflect which bank is best at getting business done, they do indicate good origination and transaction management skills. Merrill Lynch still dominates the origination area and tops both tables. But Deutsche Bank is snapping at the heels of the American bank with 24 arrangership mandates this year, two less than Merrill Lynch. When it comes to hits per dealership, SSB ranks third after Daiwa SBCM and Nomura Securities. This graph tracks the number of deals done this year for programmes on which a bank is a named dealer. To avoid distortions, we've only included banks with more than 50 mandates to their names. Banks with too many programmes under their belts suffer on this graph as their ratio of deals to mandates is small. But it helps to indicate which banks service all - not just some - of their clients well. BEST EURO-CP HOUSE OF 1999 This was a tough decision as the market is so tightly fought-over by a small number of banks with Citibank faring very well. But Deutsche Bank is top of the CPWare arranger league table, with 23 mandates signed in 1999. It also tops this year's dealership table with 46 signings, amounting to a total size of over $30 billion. The bank has been a leader in the market boasting 48% euro outstandings. As the only Euroland bank with an active presence in the market, it has been able to take advantage of its retail network. It's the market leader in Germany and the largest foreign bank in Italy and Spain. It's encouraging a broader marketplace for issuers of all types, including hybrid domestic or Euro- programmes such as those for Belgacom and KPN, which bridge the issuer's investor base between domestic and international markets. The bank also put together asset backed facilities such as that of Bills Securitisation, which securitises pools of German bills of exchange. It is one of the few asset backed, as opposed to credit arbitrage, vehicles in Europe. And Deutsche Bank is a significant contributor to the range of important regulatory reforms to the market. John Ford, head of sales at the bank, chairs the ECP Association. He has negotiated associate membership of ISMA and the monitoring of trades within the Trax system. This will help confer regulated status on Euro-CP and thereby broaden market distribution. MOST ENTERPRISING EURO-MTN HOUSE OF 1999 For this award MTNWeek gives recognition to a bank that's not necessarily top of the league tables but has still made an outstanding contribution to the market or a sector of the market in some way. We looked for innovation which has improved a bank and developed market opportunities. WDR has challenged the way the Euro-MTN market operates and put its money where its mouth is by investing in the first on-line trading system for Euro-MTNs. Other banks are known to be considering similar systems as on-line trading is expected to play a crucial part in market development. WDR launched the e-distribution system in October and in under four weeks more than $355 million was done over the web off four trades. It is a mirror version of the bank's Euro-CP system which was launched in April. It only caters for plain vanilla trades, although structured transactions should get the green light early next year. WDR is a top five bank in volume terms. Its efforts to encourage market expansion are also reflected by its pole position in the league table for service to new borrowers in 1999. This shows enthusiasm for drawing investor attention to new names and expanding the market. Paribas is one of the top houses in fund-linked and equity-linked structures. Credit Suisse First Boston's European public and private structured note business has increased by 472% on last year. And Dresdner Bank has come from nowhere to a significant position in the market. MSDW also shows innovation in the fastest growing sector of the market. It is top of the league table for service to corporate borrowers. BEST NEW EURO-MTN BORROWER OF 1999 For this award we considered those borrowers which were entirely new to the market in the last 12 months and whose inaugural deal came in 1999. FBA is the second largest corporate lender in Iceland and its privatisation was completed in November, this year. It achieved the aims of a first-time borrower. It diversified its investor base outside the domestic market to access funds in the top three currencies: euros, dollars and yen. The euro750 million ($751.74 million) programme has $489.17 million outstanding since it signed via ABN Amro in February. The 25 issues made off the facility include swap rate-linked and currency-linked notes as well as plain vanilla trades. Many dealers in the market nominated FBA as the best new borrower to come to the market this year. Much of the bank's success is down to its realistic pricing strategy and its flexible, friendly way of doing business. FBA is aware that, as an unknown borrower, it must be continuously active in different markets to build credibility. After a small inaugural transaction it has stuck to private placements. It offers diversification to investors wishing to move down the credit curve. Despite its A3 long-term debt rating from Moody's, it has found favour with Japanese investors. A close rival for the award was UK property company, MEPC which has been very active but mainly in sterling or short-term yen notes. It has yet to sell into Europe. And Jackson Life proved to be the most successful of the US guaranteed investment contract borrowers. FBA has managed to attract investor attention to a corner of the market relatively unexplored by adopting a flexible funding strategy. It did a great job of selling its story to investors. As one of only two active Icelandic borrowers in the market, FBA has made its mark in Euro-MTNs.

Debt capital markets are tough playing fields at the best of times. This is especially true in the present environment where scoring a bonus has come to mean keeping your job. However, in this game team members can switch sides, so a move from selling to buying fixed income instruments should add a whole new perspective to the match between issuer and investor. Minati Misra did just that in June this year, when she left International Finance Corporation (IFC), after seven and a half years to join a hedge fund, Banco Santander New World Investments, where she is in charge of emerging markets. She may also consider fixed income instruments in the future. A change in pace was one of the initial attractions for Misra when she decided to take on the role, and she isn't surprised about the new set of challenges this has brought. She finds it exciting because investors dictate how liquid the market is, and they generally operate at a faster pace. Misra says: "As an issuer with a $4 billion funding programme, I would maybe do one big transaction in two weeks. As an investor I sometimes do 10 trades in the same day. When I'm buying something, I might have only half an hour to decide if it's good value for me." Such a difference in pace between issuers and investors is not always the case. One borrower says: "It depends on the type of issuer you are and how you want to use your programme. If you are in continuously offered products, then you would do just as many as someone in the role of investor. Some of the big frequent players would do at least one trade a day." The change from being a spread player looking for the cheapest cost of funds, to being a buyer chasing the best compensation for market risk, is one which brings its own priorities. Having practical knowledge of both sides of the bargaining game has its benefits. Misra says of the change: "Coming from the issuer-side of things has good advantages for me. Sometimes I know what levels an issuer would be getting, so I can tell if a particular deal really is good value for me." Having such an inside track on a trade's value would give some comfort to an investor, but the risk analysis which goes with it is still difficult. A bank only brings issues to market because it thinks it can sell them. Misra thinks this means that dealers have a certain bias. She says: "They [dealers] are usually very good at explaining the upside potential of a trade but not the inherent downside risk. Not all investors are fully aware of the risk associated with each particular transaction." That said, Misra is aware that investors must bare some of the responsibility for this. She continues: "In a way, this probably comes from both sides because investors don't usually have enough time to do the analysis." Tiina Lee, head of MTNs at Deutsche Bank, puts a lot of investor nervousness down to the fact that so many of them have been hurt by the recent volatility in the market. She agrees that the level of explanation given on each transaction can vary, but thinks dealers must draw a balance between selling a product and discussing the risk associated with it. Lee says: "We provide analysis on a trade for an individual investor by giving about five different scenarios explaining how much they will gain or lose under different circumstances. Even so, how well a trade is explained depends on the individual salesman and his relationship with the account." In comparing the two roles of issuer and investor, Misra also suggests that borrowers should provide more information to the market about individual transactions. She says: "Transparency in the structured MTN market is mostly down to dealers, but issuers also have a responsibility to those who buy their paper to explain the inherent risks involved. Perhaps this could be done in their documentation." Although MTN documentation is becoming increasingly sophisticated, detailed analysis of risk is not something all issuers feel they need to include in it. One issuer explains: "Any issuance you do, ought to be properly documented and accurately represent the characteristics of the trade. But I think investors have to take responsibility for their own portfolios and not fob it off on dealers and issuers." As credit risk becomes increasingly important for investors, there is no doubt they will also have to take more responsibility for this analysis themselves. Therefore a strong rating for an issuer will not guarantee its paper a favourable reception from investors. Misra says: "Investors have a growing concern about issuer credit risk as well as the general market risk involved, specifically in the emerging markets. They will be doing a lot more of this analysis themselves rather than just relying on what the rating agencies say, especially since so many got burnt in Asia and Eastern Europe." Whilst the roles of issuer and investor pull in different directions, it is in the interest of dealers to figure out the best way to create a win/win situation for all involved. Who has the easier task is debatable. But Misra shows no sign of regret for her move to the investor-side of the game. She says enthusiastically: "It's easier to be an investor because the market is demand-driven. A borrower has less flexibility. On the other hand, borrowers don't face the same risk of losing large amounts as investors. They definitely sleep better at night."