Bankers Trust New York Corp. has begun marketing a $100 million issue of a hybrid security that starts as debt and can be exchanged for preferred stock.

The issue is expected to have a tough time competing for investor's interest against a preferred stock issue by RJR Nabisco that is offering a higher yield and a simpler structure.

The Bankers Trust issue will start as 40-year subordinated debt. The bank has the option of lowering the rate by 1.5 percentage points.

At that point, investors can opt to exchange the debt for preferred stock, with a dividend equal to the debt's original rate.

Because the issue starts off as subordinated debt, with tax-deductible interest payments, the issue is less costly to Bankers Trust than straight preferred stock, whose dividends cannot be deducted from taxes.

Sole manager Goldman Sachs & Co. is marketing the issue to carry a rate of 7.38% to 7.5%, with pricing expected as early as today. Market sources said that a number of investment banks with large retail brokerage networks declined to be co-managers of the issue due to its complex structure and its low rate.

They also noted that the Bankers Trust issue may have a hard time attracting investor interest while RJR Nabisco Holdings Corp. is marketing a $750 million issue to have a dividend of around 9.25%.

In addition, RJR is rumored to be seeking to raise the offer to anywhere from $1 billion to $1.25 billion, which would take a lot of liquidity out the preferred market.

Earlier this year, a preferred stock issue by International Business Machines Corp. of more than $1 billion saturated the market and put a damper on the sales of a number of bank preferred issues.

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