LATAM Debt capital markets: Merrill’s not so steady ship


Lawrence White
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What’s going on at Merrill Lynch? The investment bank has posted impressive overall first-quarter results, as revenues hit the $8 billion mark, but the Latin American debt capital markets desk seems to be lagging.

The bank has fallen dramatically in the league tables and uncertainty seems to surround the identity of the person leading the origination business for the region. Dan Vallimarescu, who was head of Latin American debt capital markets for a number of years, left in September – he has just resurfaced at Banco Santander – and it now appears that the role of his successor, Michael Lucente, will change.

No official decision has been announced but a source at the bank suggests that Lucente will move from being head of debt capital markets to a role with more involvement in proprietary trading. His is not the only personnel change. In a sign that an experienced hand is needed to steady the ship, James Quigley, vice-chairman of the executive client coverage group and president of Merrill Lynch International, has taken on an official role for the region. At the end of the first quarter he was also appointed head of Latin America global markets and investment banking.

This instability might explain Merrill Lynch’s slide in the Latin American debt capital markets bookrunner league tables. The firm was fifth in 2004, 10th in 2005 and 19th at the end of the first quarter, with two small deals. Is the bank falling behind?

Wylie Collins, head of debt capital markets for the Americas at Merrill Lynch, says not. “We will continue to lead the market with innovative deals,” he says, “and are confident in the team we have.” He adds: “Michael’s move is a natural transition. He will still be very active in Latin America, and we remain as committed to the region as ever.”

Merrill Lynch has certainly pulled off some of the biggest deals in Latin America over the past couple of years. It was one of the international advisers on the most important transaction in the region in 2005, the Argentina debt restructuring. In late 2004 it was also responsible for the $1.75 billion perpetual bond for Mexican oil company Pemex – the first Latin American perpetual transaction.

A banker at a rival house says Merrill Lynch’s league table position shouldn’t be too big a worry. “Merrill Lynch was the second-best shop in our market last year. Although league table performance is more important than we sometimes like to admit, who cares if you’re first or fourth? If Merrill dropped out of the tables for a couple of years running, then there’d be a problem. You also have to remember that a lot of deals in this region [including the Argentina debt restructuring] aren’t eligible for league tables.”