Just beaten last year by Warburg Dillon Read, Salomon Smith Barney wins this year’s corporate bond house award for its continued and growing success worldwide.
The successful integration of the investment bank with the relationship bank and balance sheet of Citibank has been a large factor.
Although Salomon Brothers did compete before the merger with Travelers in 1997, it had the risk profile of a hedge fund, and much of the firm’s resources were placed there. Travelers CEO Sandy Warner disposed of the dominance of the prop trading desks, and the 1998 merger with Citibank added the balance sheet and global relationships. And since March Salomon has been running an investment-banking joint venture in Japan with Nikko Securities.
“In the wake of the Citi-Travelers merger our origination and distribution teams have been firing on all cylinders,” says Geoffrey Coley, managing director and head of US credit markets at Salomon Smith Barney “We’re the only US house dominant in all three majors, dollar, yen and euro. We’re now the house of choice in virtually all markets.”
That may be an exaggeration, but not by much.
In 1999 the bank lead-managed one third of jumbo financings in the US, including over half of those of $2 billion or more, for companies such as AT&T, DaimlerChrysler, Electronic Data Systems and Ford – along with Merrill Lynch and Bear Stearns, Salomon devised Ford’s global landmark securities programme, and underwrote the first deal, at $8.6 billion the largest-ever corporate issue.
This year IBM, GE Capital and Deere&Co have been among Salomon’s mandates.
Two IBM issues, each of e1 billion, showed off Salomon’s dominance of the euro market, where it ranks first in corporate bond underwriting.
It has lead managed most of the major telecoms deals in Europe, such as the e6 billion offering for KPN, e5.25 billion deals for France Télécom and Vodafone, and a e1 billion offering for finnish company Sonera. Other euro deals include a e750 million for Dutch publishing house VNU and French retailer Carrefour.
“We spotted early on that that the euro would transform European credit markets pretty quickly,” says Erik Winter, managing director, debt capital markets, at Salomon Smith Barney in London. “We underwrote the first deal to be cleared in euros, for Finnish forestry company Metsa-Serla.”
Winter, too, credits much of Salomon’s rise to the merger. “We now have a local presence in 100 countries, and relationships through Citi with many of the corporates, whether for transaction services, foreign exchange or other services. When it comes to choosing a lead manager for their bonds, they already know us.” Another benefit has been Citi’s balance sheet. “In M&A, for instance, we can provide bridging loan funds and then come up with a well thought through exit strategy in the bond markets,” says Winter.
