Bank of Boston Corp., anticipating Federal Reserve approval of its application for securities underwriting powers, has begun assembling a junk bond group.

This week, the banking company named three executives to key posts.

Peter Merrill, an eight-year veteran of Bank of Boston, was appointed managing director of high-yield research. Donald Mykrantz, formerly of Baring Asset Management, was named director of high-yield sales. And Neal Reiner jumped from Bear, Stearns & Co. to become director of high yield capital markets - essentially, a liaison between the investment banking and sales and trading sides of the junk bond group.

They join the fledgling high-yield securities group headed by Steven A. Shenfeld, who came to Bank of Boston in April as managing director. He had been head of global finance sales and trading at Bankers Trust New York Corp.

Another key member of group is David Weinstein, who came over from Chase Manhattan in July as managing director and head of high yield markets. He oversees the capital markets team led by Mr. Reiner.

Bank of Boston, which has $62.4 billion in assets, announced Aug. 27 that it is seeking Fed approval to create a securities underwriting subsidiary, known as a section 20 unit. Approval could come early next year, sources said.

Mr. Shenfeld said that the bank intends to extend its new powers to the midsize domestic corporations it already serves in its lending business. Bank of Boston has traditionally catered to companies with assets of $50 million to $750 million.

As banks expand into securities underwriting, many of them have identified junk bond financing as a prime opportunity. Bankers say the business closely resembles the leveraged lending business that they're already in. Mr. Merrill, for instance, is moving over from the bank's diversified finance group, where his duties included leveraged lending.

But better-established rivals in the junk bond field say newcomers face stiff competition.

"Everyone thinks that because they have a lending relationship, they'll win the high yield business," said Ted Virtue, managing director at Bankers Trust Securities Corp. "That just isn't the case.

"Issuers want optimal execution in all the securities markets, and they are looking at market leaders to do that. It took us years to build up business."

Still, Mr. Virtue praised Bank of Boston's recruiting effort. He called Mr. Shenfeld "very savvy in the high yield marketplace," and "a great addition for their institution."

Mr. Shenfeld acknowledged that there are steep hurdles to overcome, but said he was confident the bank is up to the challenge.

"I do think it is a competitive business, but we have legitimate reasons to believe that we can compete," Mr. Shenfeld said.

And others said there's still room for banks to enter the business, provided they can assemble top-notch teams.

"You need analysts, salespeople, and traders who have strong relationships, and are still highly motivated and hardworking," said Steven A. Ruggiero, a managing director of high-yield-securities research at Chase Securities Inc.

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