Private Placement Issues Swell 60%

Private placement issues rose 60% in the first half from a year earlier, putting 1997 on track to smash last year's record of $203 billion.

According to Securities Data Co., private placements hit $146 billion during the first six months, driven mainly by an increase in the high-yield and Rule 144a markets.

"The traditional private placement market has not increased as rapidly as the bank and high-yield markets, because they are offering extraordinarily aggressive terms right now," said Chris Barber, managing director of Prudential Securities Inc.'s private placement group.

Volume was roughly $91.8 billion in the first half of 1996 and climbed to $111 billion in the second half.

Merrill Lynch & Co. ranked first in overall private placements during the first half. The investment bank raised $18.2 billion from 258 deals. Merrill Lynch also held the top spot during the first half of 1996, raising $10.7 billion from 182 issues.

Morgan Stanley Dean Witter climbed to second place during the first half, with $14.1 billion from 180 issues. The firm ranked fifth a year earlier.

The majority of private placements issued in the first half were through the Securities and Exchange Commission's Rule 144a, which allows institutional investors to trade unregistered securities on the secondary market.

"High-yield as an instrument is becoming such an efficient manner of execution to the point that the classical private market has subsided," said Sam De Rosa-Farag, co-head and managing director of high-yield research at Donaldson, Lufkin & Jenrette.

Rule 144a issues hit $113.5 billion in the first half, almost twice as much as a year earlier.

Morgan Stanley Dean Witter ranked first for 144a issues, with $12.6 billion from 160 deals.

Traditional, or plain-vanilla, private placements still make up the second-largest piece of the market, jumping to $55 billion during the first half, from $34 billion a year earlier.

Merrill Lynch was the top agent for traditional private placements, raising $9.5 billion from 102 issues.

Finally, straight-debt, high-yield private placements more than doubled to nearly $43 billion during the first half. Because a big chunk of high- yield deals are done through 144a, some issues were counted twice by Securities Data.

The large amount of funds flowing into the market and the opportunity for issuers to lock in long-term, fixed-rate capital will keep volume high, predicted Phillip Berney, a senior managing director at Bear, Stearns & Co., which placed third among managers of straight debt high-yield issues during the first half.

"The high-yield market has been much more active this year than it was last year, and last year was a record year," he said.

Donaldson, Lufkin & Jenrette Securities Corp. nabbed first place for straight-debt, high-yield agenting, with $3.38 billion from 42 issues, according to Securities Data, which gave equal credit to each manager, regardless of which firm led the deal. Chase Manhattan Corp. ranked second, with $3.21 billion from 50 issues. Bear, Stearns followed, with $3.20 billion from 42 issues.

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