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Capital Markets

Bankers put their heads on the blocks

Equity capital markets bankers agree that  accelerated transactions and bought deals are here to stay. Such deals dominated ECM issuance for most of 2003, with fully bought deals accounting for 54% of all block trades. This, however, obscures the fact that many accelerated block trades that are not officially bought deals have aggressive backstop arrangements that make them little different to those officially classed as risk trades. Clients in need of cash like them because the discounts are tighter, sometimes substantially so. This is despite the fact that in every quarter last year they had substantially worse after-market performance.

Despite the expected pick-up in ECM issuance this year, bankers are yet to appear more discerning about deals. Indeed, they appear even more ruthless about winning block-trading business.

Rivals estimate that Citigroup's losses from its disastrous attempt at a e1.8 billion block trade of Infineon shares for Siemens this January could be as much as e100 million.

This over-ambitious bidding for business or perhaps reckless pursuit of league table credit is reaching new heights.

This January there were two last-minute waivers of lock-up agreements. Goldman Sachs and Merrill Lynch released Yell's private-equity investors Apax and Hicks Muse Tate & Furst from their agreement not to sell their remaining £720 million-worth ($1.31

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