Commercial banks are expected to bring a slew of high-yield deals to the market over the next three weeks, ending a breakthrough year for bank bond shops on a high note.
NationsBanc Capital Markets is planning to bring a $120 million junk bond issue for Delta Beverage to the market soon, while Citicorp Securities is lining up a $200 million financing for Global Par.
At the same time, J.P. Morgan Securities is set to lead a $150 million deal for Quest Diagnostics, and Chase Securities is preparing to lead a $100 million issue for Safelite Glass. BT Securities, meanwhile, is arranging a $125 million package for Heartland Wireless.
To be sure, investment banks like Donaldson, Lufkin & Jenrette and Merrill Lynch & Co. continue to take the top ranks among high-yield bond managers.
Nonetheless, investors are noticing the increased presence of commercial banks in the high-yield market.
"Generally speaking, they've been involved in the same deals that you'd see from the investment banks," said Tom Haag, a high-yield bond investor with the Lutheran Brotherhood in Minneapolis.
Investors said a number of banks, such as Bankers Trust and Chase Manhattan, have continued to build market share over the last few years as other banks, such as NationsBank and Canadian Imperial Bank of Commerce, have started to develop their execution skills.
"Going into the second half of this year, the commercial banks have increased their market share," Mr. Haag said.
Much of the recent activity in the high-yield market has included transactions for leveraged buyout firms, such as Kohlberg, Kravis & Roberts and Thomas H. Lee & Co.
"Banks have strong relationships with a number of the sponsors who are doing mergers and acquisitions," said Steven A. Ruggiero, a managing director and head of high-yield securities research at Chase.
"Banks have relationships with customers that aren't necessarily tapped by investment banks," he later added.
Observers said that the new-issue market has done well over the past few weeks, but they cautioned that at yearend the high-yield market, like the stock market, experiences a selloff as investors clean up their portfolios.
"We're not quite completely through it yet," said Mr. Haag, "but it looks like the market is starting to turn around."
Investors generally expect a good first quarter, barring a correction in the stock or bond markets.
