Riding a newfound enthusiasm for the single European currency, BankAmerica Corp. plans to develop a high-yield debt business in London.
Thomas White, managing director for fixed-income products at BankAmerica in New York, is heading the effort to originate and syndicate capital market debt issues for below-investment-grade companies in Europe, banking sources said.
A spokeswoman for the Charlotte, N.C., banking company confirmed the report. "We already have a small presence, but we will be expanding," she added.
BankAmerica's decision to expand its origination and syndication of high-yield loans and debt in Europe is part and parcel of a broader move by U.S. banks to expand activities in the European Union, which began using a single currency on Monday.
BankAmerica is the latest U.S. institution to target high-yield debt in Europe, following Bankers Trust Corp., Chase Manhattan Corp., J.P. Morgan & Co., and BankBoston Corp. First Union Corp. is also giving some thought to expanding high-yield activities in Europe.
Though the high-yield market has expanded enormously in the United States over the last few years, it is in its infancy in Europe.
However, bankers said the introduction of the euro, the new single currency being used by 11 of the 15 member countries of the European Union, has opened enormous possibilities by creating a single large and liquid market for debt and equity issues.
That, combined with emerging demand for euro-denominated securities, has created a favorable climate for fast growth in capital market activities, including high-yield issues, they added.
"Our intention is to export our capabilities from here to Europe," said a spokesman for Chase, which late last year moved Thomas Walker, managing director in the bank's high-yield unit, and 10 senior bankers from New York to London to build up high-yield finance operations in Europe.
European banks, too, are positioning themselves to develop high-yield activities, often starting out by building teams in New York.
"The high-yield market in Europe will develop faster with the advent of the euro," predicted Philippe Blavier, head of corporate finance in Paris at Banque Paribas, which started a high-yield operation a year ago.
Mr. Blavier noted that the overall market had lost a lot of momentum last year after Russia failed to meet its debt payments and Long Term Capital Markets, a Greenwich, Conn., hedge fund almost collapsed. But, he added, "the market has opened again cautiously, and we hope the rebound will be confirmed."
Bullishness about high-yield and other capital markets business in Europe follows what is broadly viewed as a successful launch of the euro on Monday.
"Around 80% of corporate finance activity in Europe is through the banking system and around 20% through capital markets," noted Robin Marshall, head of European research at Chase in London.
"Clearly, any changes in those numbers to anything like the (issuance levels in the) U.S. could give you an explosion in capital-raising by private sector corporations."
Though the European equity market is still far smaller than that of the United States and the debt market is mainly government bond issues, bankers predicted that capital markets business should grow quickly in Europe, barring a major downturn in either the European or worldwide economies in 1999.
Growth of the European capital market, they added, will create opportunities for underwriting euro-denominated debt and equity, mergers and acquisitions, asset management, and securities custody and processing.
"Investors were massively underinvested in Europe, " said Claudio Zampa, senior vice president in BankAmerica's global capital markets group in London. "There will be a massive and continued flow of funds into the euro."
Bankers noted that though big U.S. banks have an advantage over European institutions in capital markets business because of their greater expertise and pan-European networks, they will soon face competition from European banks and smaller foreign banks, including U.S. superregionals.
"The people who move first will have an advantage," Mr. Blavier said. "But that advantage will erode over time as others join in the fray."
