Credit Suisse First Boston is syndicating $695 million in hybrid loans for two companies-the biggest hybrids to hit the market this year.

The bank expects to soon close a $320 million hybrid for Repap New Brunswick Inc., a paper maker and marketer in Stamford, Conn. Last week it closed a $375 million deal for Ocean Rig ASA of Oslo, Norway, a drilling- rig operator and investor.

The deals are the latest evidence that the loan and bond markets are rapidly converging. Hybrid loans offer the basic structure of a corporate loan but integrate the features of other instruments, most commonly bonds.

As insurance companies and funds swallow a larger part of the syndicated loan market, deals are increasingly being structured to meet investors' tastes and, specifically, to compete with bonds.

Credit Suisse's hybrids are far from the first. In 1996, Bankers Trust Co. led a $100 million hybrid for Huntsman Specialty Chemicals. Last year, Donaldson, Lufkin & Jenrette syndicated a $75 million hybrid for Pioneer Americas.

Yet two features make the Credit Suisse financings stand out as examples of how hybrids are being structured for today's market. First, the loans include variable-rate parts tied to the London interbank offered rate, as well as fixed-rate parts. Second, the loans allow borrowers to call them before maturity.

Those features are more likely to be found in bonds than in traditional syndicated loans. But Credit Suisse's new packages are considered hybrids because they don't "fit the template of what is simply a loan or a high- yield bond," said Richard B. Carey, a director of syndicated finance at Credit Suisse.

For the borrower, the Credit Suisse financing offers two advantages. In addition to the call feature, the loans are easier to process and distribute than high-yield bonds.

"If you had to be beholden to the high-yield market" which is overwhelmed by supply, Mr. Carey said, "it probably would have meant an uglier execution."

Credit Suisse sold the hybrids by touting the variable-rate part's ability to hedge against interest rates. Meanwhile, the fixed-rate part offers a substantial return because the loans are highly leveraged, Mr. Carey said.

For instance, the Ocean Rig deal has a $125 million floating-rate loan due in 2008. The price is Libor plus 4.75%, and can be called at a premium of 3%, 2%, and 1% during each of the first three years, respectively.

A second, $250 million, fixed-rate loan due in 2002 is priced at 10.25%, about 4.60% over the current price for 10-year Treasury bonds. The fixed- rate part cannot be called by the borrowers without an agreement with investors. Pricing for the Repap loan has not been released.

"This isn't to say we're the only ones doing this, or the first," Mr. Carey said. "But we do think we're pioneers in trying to come up with these kinds of structures."

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