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Headline: A new league table - by quality
Source: Euromoney
Date: June 2000
Author: Brian Mooyaart
Bond issuers need to take account of the success of lead managers at pricing as well as their ability to capture market share. The two do not coincide, according to Brian Mooyaart's research. Mooyaart contributes the following article and accompanying tables and Euromoney invites comment on their
relevance and usefulness from the viewpoint of borrowers and banks. E-mail your thoughts to editor@euromoneyplc.com.
As globally capable lead-managers become fewer, more placement-capable and more powerful, borrowers are increasingly asking which of them they should be considering for a public bond issue. The answer has become all the more important in view of record credit spreads in the market.
Starting from a benchmark curve based on 25 of the most liquid and highly rated issues in each capital market, we have measured the issuing terms and conditions of over 500 issuers, as a spread above this basis curve. As spreads change, that change is shown up in the basis curve, which in turn goes on to reflect those changes throughout the ratings categories and sectors of those 500-plus issuers. The resulting new-issue credit spreads are therefore constantly marked to market. Moreover, the data are tested and verified on every new issue that appears. With a substantial and constantly expanding database, we are thereby able to define the ideal spread at issue of each borrower as it contemplates coming to market. (See previous publications in Euromoney as to methodology: July 1995, June 1996, October 1997, September 1998, March 1999.)
To compile league tables of the best lead managers, we take all public fixed-rate bond issues since the beginning of the year in dollars, euros, yen and sterling. All deals that did not come on terms to within three basis points of the ideal spread at issue were ignored. The result gives a ranking of lead managers showing those that bring the correctly-priced transactions and are able to do so in volume. These are the investment banks that we believe issuers should talk to.
Compared with traditional league tables based on volume, one feature is immediately apparent. The names are often the same but the ranking is substantially different. Those at the top, in terms of raw volume of issues lead managed, often drop well down when it comes to the volume of accurate deals.
The dollar table illustrates this by placing UBS Warburg in top position with Merrill Lynch third, in contrast to Merrill's primary position in terms of volume of transactions. Merrill, CSFB and UBS Warburg are consistent performers in the top three. ABN Amro too scores well in this table - better than it would have done just on volume. Deutsche dropped out from its 10th place at the end of February, but would still be among the top 10 by volume. Last month BNP Paribas raced up into 10th position on pricing accuracy.
In euro issues the three German banks are dominant. However, the accurately-priced transactions so frequently brought by Dresdner Kleinwort Benson and Commerzbank push them much further up the league table than their position by volume. The US investment banks clearly struggle in this market, partly because of the inclusion of Pfandbrief issues, which is justified on the grounds that this asset class is a globally-placed investment medium. On volume lead managed, firms such as Morgan Stanley Dean Witter and JP Morgan do well in this market (inclusive of Pfandbriefe). The fact that their ranking falls when it comes to accuracy shows that little of it is due to that particular type of asset per se.
In the rapidly-growing yen market, Tokyo-Mitsubishi performs consistently well, Nomura much less so. The sudden appearance of Barclays Capital is remarkable. The UK bank has come from nowhere into second place. It brought a flow of well-priced transactions and caught the market napping. Such a leap in ranking has also been identified in tables based on raw volume. However, combining this with pricing expertise makes its credibility much more readily apparent.
In sterling, Barclays Capital's primary position makes more sense. In a market that has essentially become one of firm institutional placement at the long end of the curve, Merrill Lynch fell out of first position in January. Indeed other major houses such as Morgan Stanley Dean Witter, Goldman Sachs and JP Morgan are also having trouble maintaining their positions. That also applies to the German banks: Commerzbank has not yet even put in an appearance. UBS Warburg and RBC/DS on the other hand do well in this market.
This is a particularly interesting time to benchmark lead-manager pricing expertise. Use of the internet has barely affected these tables but this will change rapidly. Using this type of best lead manager league table approach it is much easier to identify those that are accurate in bringing their clients to market and are also internet capable. Those that have these joint attributes are going to climb the leagues tables much earlier than those based purely on volume lead-managed. The best lead-manager league tables will look very different by December. Issuers need to know which of the investment banks they should be talking to.
| Best bookrunners: $ bonds |
| by vol of accurate deals |
| Pos. Jan 1 to Apr 30-2000 |
| 1 |
UBS Warburg |
| 2 |
CSFB |
| 3 |
Merrill Lynch |
| 4 |
Morgan Stanley Dean Witter |
| 5 |
ABN Amro |
| 6 |
JP Morgan |
| 7 |
Goldman Sachs |
| 8 |
Salomon Smith Barney |
| 9 |
Lehman Brothers |
| 10 |
BNP/Paribas |
| Mooyaart Termstructures, all rights reserved www.mooyaart.com |
| Best bookrunners: ¥ bonds |
| by vol of accurate deals |
| Pos. |
Jan 1 to Apr 30-2000 |
| 1 |
TMI Tokyo-Mitsubishi |
| 2 |
Barclays Capital |
| 3 |
Merrill Lynch |
| 4 |
Morgan Stanley Dean Witter |
| 5 |
Nomura Securities |
| 6 |
Deutsche Bank |
| 7 |
Goldman Sachs |
| 8 |
Salomon Smith Barney |
| Mooyaart Termstructures, all rights reserved www.mooyaart.com |
| Bookrunners international $ bonds Jan 1-Apr 30 2000 |
| Pos. |
Manager |
Amt US$ m |
Iss. |
%share |
| 1 |
Merrill Lynch |
29,423.75 |
82 |
13.98 |
| 2 |
Morgan Stanley Dean Witter |
22,393.16 |
59 |
10.64 |
| 3 |
Goldman Sachs |
19,867.00 |
29 |
9.44 |
| 4 |
Salomon Smith Barney |
19,838.86 |
46 |
9.42 |
| 5 |
Credit Suisse First Boston |
18,434.12 |
66 |
8.76 |
| 6 |
JP Morgan |
16,158.92 |
34 |
7.68 |
| 7 |
UBS Warburg |
15,617.00 |
39 |
7.42 |
| 8 |
Deutsche Bank |
14,783.33 |
27 |
7.02 |
| 9 |
Lehman Brothers |
13,281.08 |
18 |
6.31 |
| 10 |
ABN Amro |
7,617.17 |
28 |
3.62 |
| Total of issues used in the table |
210,525.67 |
423 |
100 |
| Source: Capital DATA Bondware |
| Bookrunners international ¥ bonds Jan 1-Apr 30 2000 |
| Pos. |
Manager |
Amt yen bn |
Iss. |
%share |
| 1 |
Barclays Capital |
488.5 |
17 |
15.71 |
| 2 |
Morgan Stanley Dean Witter |
425.08 |
39 |
13.67 |
| 3 |
Nomura Securities |
371 |
13 |
11.93 |
| 4 |
Bank of Tokyo-Mitsubishi |
365.83 |
9 |
11.77 |
| 5 |
Merrill Lynch |
343.62 |
48 |
11.05 |
| 6 |
Salomon Smith Barney |
246 |
30 |
7.91 |
| 7 |
Daiwa Securities |
203.4 |
91 |
6.54 |
| 8 |
UBS Warburg |
177.1 |
39 |
5.7 |
| 9 |
Deutsche Bank |
120.1 |
11 |
3.86 |
| 10 |
Dai-Ichi Kangyo Bank |
92.3 |
78 |
2.97 |
| Total of issues used in the table |
3,108.55 |
393 |
100 |
| Best bookrunners: e bonds |
| by vol of accurate deals |
| Jan 1 to Apr 30 2000 |
| 1 |
Deutsche Bank |
| 2 |
Dresdner Kleinwort Benson |
| 3 |
Commerzbank |
| 4 |
DG Bank |
| 5 |
HypoVereinsbank |
| 6 |
UBS Warburg |
| 7 |
ABN Amro |
| 8 |
CSFB |
| 9 |
Morgan Stanley Dean Witter |
| 10 |
WestLB |
| Mooyaart Termstructures, all rights reserved www.mooyaart.com |
| Bookrunners international e bonds Jan 1 - Apr 30 2000 |
| Pos. |
Manager or Group |
Amt e m |
Iss. |
%Share |
| 1 |
Deutsche Bank |
27,840.24 |
98 |
12.51 |
| 2 |
Dresdner Kleinwort Benson |
15,848.87 |
71 |
7.12 |
| 3 |
Morgan Stanley Dean Witter |
14,172.66 |
55 |
6.37 |
| 4 |
JP Morgan |
13,173.33 |
33 |
5.92 |
| 5 |
ABN Amro |
13,022.37 |
51 |
5.85 |
| 6 |
UBS Warburg |
12,605.62 |
53 |
5.67 |
| 7 |
Salomon Smith Barney |
12,456.62 |
34 |
5.6 |
| 8 |
BNP/Paribas |
10,884.17 |
43 |
4.89 |
| 9 |
Credit Suisse First Boston |
9,214.68 |
41 |
4.14 |
| 10 |
Commerzbank |
8,505.10 |
49 |
3.82 |
| Total of issues used in the table |
222,512.98 |
569 |
100 |
| Source: Capital DATA Bondware |
| Best bookrunners: £ bonds |
| by vol of accurate deals |
| Jan 1 to Apr 30 2000 |
| 1 |
Barclays Capital |
| 2 |
Warburg Dillon Read |
| 3 |
RBC/DS |
| 4 |
Merrill Lynch |
| 5 |
Morgan Stanley Dean Witter |
| 6 |
Deutsche Bank |
| 7 |
Dresdner Kleinwort Benson |
| 8 |
Salomon Smith Barney |
| 9 |
Goldman Sachs |
| 10 |
JP Morgan |
| Mooyaart Termstructures, all rights reserved www.mooyaart.com |
| Bookrunners international £ bonds Jan 1- Apr 30 2000 |
| Pos. |
Manager or Group |
Amt £ m |
Iss. |
%Share |
| 1 |
UBS Warburg |
2,641.87 |
42 |
13.94 |
| 2 |
Barclays Capital |
2,432.00 |
26 |
12.83 |
| 3 |
JP Morgan |
1,735.00 |
10 |
9.15 |
| 4 |
Deutsche Bank |
1,557.00 |
22 |
8.21 |
| 5 |
HSBC |
1,497.53 |
14 |
7.9 |
| 6 |
Morgan Stanley Dean Witter |
1,490.50 |
13 |
7.86 |
| 7 |
Dresdner Kleinwort Benson |
1,474.43 |
12 |
7.78 |
| 8 |
Goldman Sachs |
1,350.00 |
10 |
7.12 |
| 9 |
Merrill Lynch |
1,300.50 |
13 |
6.86 |
| 10 |
Salomon Smith Barney |
1,010.00 |
8 |
5.33 |
| Total of issues used in the table |
18,957.38 |
171 |
100 |
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