HSBC Holdings' plan to buy Republic New York Corp. may mean a boon in the long run for bondholders of the two banking companies, analysts said.

"Republic bondholders will benefit over the long term in having one of the world's largest and most profitable banks," said Carl de Jounge of Deutsche Bank Securities. "Republic was at disadvantage on its own, because it didn't have the scale and diversity that other large banking institutions do."

HSBC Americas Inc.-HSBC's U.S. subsidiary-is lower-rated by the agencies. Holders of its bonds will stand to gain when merged with Republic, which has higher capital ratios and is viewed by observers as having a more conservative management.

On Wednesday, Duff & Phelps Credit Rating Co. placed Republic's senior debt rating on watch for a downgrade. "Republic is a very highly rated organization," said Thomas G. Stone, vice president at Duff & Phelps. Republic is "going to be additive to HSBC. The question is how much. There is more of an opportunity to go down than up."

HSBC Americas has $200 million of 10-year subordinated bonds due in 2009. They are trading on the secondary market in the range of 110 to 112 basis points above U.S. Treasuries, sources said.

Republic's $250 million subordinated issue-less liquid in part because they are due in 2008-are trading on a limited basis at around 120 basis points over Treasuries.

Still, both issues are at bargain levels compared with money-center issues, which are trading near 100 points above Treasuries.

"You're seeing some value in these securities," Mr. de Jounge said. "Investors might be a little skittish because of the unknowns."

What may be holding back some investors is the uncertainty with the final outcome of the merger.

Prices of Republic's bonds will also face downward pressure because the New York bank may divest some of its international private banking businesses, said John Otis, an analyst for Bear, Stearns & Co.

The merged company, Mr. Otis added, may also bear the burden as a so- called Yankee issuer, a term referring to foreign banks issuing bonds in the U.S. market. Republic will also be without Edmond Safra, the highly regarded founder of the bank and of Safra Republic Holdings, who will sell his shares in the companies.

The final ratings outcome may also affect how HSBC decides to finance its purchase. After the merger announcement, the London-based holding company sketched out its financing plans, with roughly $1 billion of the $10.3 billion price tag to be raised by selling more bonds.

The bank could issue more bonds in the U.S, or turn to Europe. Issuing the bonds through the parent company abroad may have less of an impact of watering down outstanding issues, some analysts said.

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