Citicorp has hired Claudio Phillips, a former NationsBank Corp. managing director, to head emerging-markets loan trading and establish a Mexican trading desk in New York.
Citi expects to be the first banking company to open a desk dedicated to trading distressed, near-par, and par syndicated loans of Mexican corporate borrowers.
"Given the high investor interest in the emerging markets, in general, and their comfort level with Mexican borrowers, specifically, the market environment seemed ripe for opening a desk dedicated to trading Mexican corporate loans," said Jonathan Calder, managing director and head of global loan trading at Citicorp.
Mr. Phillips, who is Mexican-born, was a NationsBank managing director of capital markets services for emerging markets. At Citicorp-to which he is returning after beginning his career there as a money market trader in 1983-he will report to Mr. Calder.
Secondary loan trading is still a developing market globally, with about 40 trading desks participating.
Among those institutions with trading desks, only a handful have dealt in Latin American credits thus far, including Citicorp; ING Group; Donaldson, Lufkin & Jenrette; and Chase Manhattan Corp., said one trader. Most emerging-market loans traded have been for Argentine or Brazilian companies, not Mexican ones.
The level of liquidity for these loans in the secondary market will be a central factor in determining its success.
"In Latin America right now, most people are focusing on distressed (loans). In near-par, there's a little bit of activity but not much," said one secondary loan trader. "It's just not that liquid" a market.
During the past five years, trading volume in European loans has been disappointing, leaving the U.S. domestic market as the only mature market to date, said the trader. But Latin America is "definitely an emerging market" for loan trading and should see significant growth in the next 12 months.
Also crucial to the success of a secondary loan market is a sufficient stream of new syndicated loans in Latin America, which would need to grow exponentially.
Citicorp was the leading syndicated lender to Latin America in the first quarter, acting as agent in 15 deals for more than $2.1 billion, according to Loan Pricing Corp. Citicorp was followed by BankAmerica Corp., Chase Manhattan Corp., and J.P. Morgan & Co. In that period, Mexico generated less than $1 billion in total syndicated loan volume.