JUST A FEW years ago, emerging-market bond issue was a profitable business. Sovereign deals from such countries as Hungary or Russia would bring in fees of anything between 50 and 100 basis points for the one or two lead managers on the deal. The business was also prestigious. Banks such as JPMorgan and CSFB made names for themselves by bringing emerging-market countries to the Eurobond market. As a result, it was a business in which most banks wanted a presence, so they set up desks of five to 10 people for each region to cover Latin America, Asia and emerging Europe.
However, in the past 12 months fees have come crashing down in emerging Europe, to the point where Romania, which just last year paid 65 cents on its seven-year deal, was pitched 10 cents by one European bank for its forthcoming Eurobond issue. South Africa, which awarded its Eurobond mandate in late April to Dresdner Kleinwort Wasserstein and Citigroup, was reportedly bid five cents by one bank. In recent issues from Poland and Hungary, fees were down to the 15bp level. The lead manager for Ukraine's approaching bond issue - DrKW - won't even say how low the fees are for it.