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Banking

Europe's retail market to get fair deal

Europe's retail investors are about to be inundated with securities that claim to put them on a par with the most prized funds.

In December, Landesbank Baden-Württemberg (LBBW) was planning to become the first AAA issuer of continuously offered bonds in Europe. LBBW was due to join Bank of America and FCE Bank, the European funding arm of Ford Motor Credit, in issuing InterNotes.

InterNotes are fixed-income instruments that investors can buy or sell in denominations of just $1,000, £1,000 or e1,000. They have an all-in fixed par price and a flexible coupon structure, so the investor can select monthly, semi-annual or annual coupon payments. The bonds are offered every week.

InterNotes were developed in the US by specialist investment bank Incapital, which is 25% owned by Bank of America.

Tidy fee With a typical bond, two or three banks cream off a tidy fee and run the book, backed by a further four or five banks acting as co-leads. With InterNotes, however, Incapital structures the product for a small fee and then puts around 300 banks into the syndicate.

As an incentive, those 300 banks earn a large fee for selling the instruments.

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