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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.

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.