Syndicated lending volume hit a new high in the second quarter, thanks in part to investment banking services that banks now offer.

A total of $228 billion of syndicated loans came to market in the quarter, eclipsing the previous record of $203 billion set in the third quarter of 1994, according the Loan Pricing Corp.

Bankers acknowledged that the whopping total included $60 billion of refinancing. But they pointed out that many of the deals closed in the quarter included bond and equity components that are not a part of the traditional bank business.

The multifaceted deals underscore the progress banks have made in exploiting the convergence of commercial and investment banking as Congress continues to consider removing the remaining Depression-era barriers between the businesses.

"We saw from the competitive point of view the importance in leveraged acquisitions of being able to provide and raise capital for the entire right-hand side of the balance sheet," said Chad Leat, head of loan syndications at Chase Manhattan Corp.

Among the deals that illustrated the soup-to-nuts financing was a deal for the spinoff of the Six Flags amusement park business that was part of a $9 billion financing led by Chemical Banking Corp. for Time Warner.

In addition to providing a traditional bank loan for $600 million, Chemical was the sole arranger of a $285 million junk bond offering, acted as an merger and acquisition adviser to Six Flags, and made an equity investment through its venture capital unit.

A similar scenario unfolded in a financing for Dominick's Grocers by Chase Manhattan and Bankers Trust New York Corp. that included a $430 million bank loan, a subordinated bridge loan for $150 million that was replaced by bonds, and an equity account of about $100 million.

In a third example, NationsBank Corp.'s Texas unit led an $80 million bank loan for Day International Corp. in a financing that also included a $100 million bond issue led by NationsBank Corp. and Donaldson Lufkin & Jenrette.

Bankers pointed out that investment banks such as Credit Suisse, Goldman Sachs, Merrill Lynch, and DLJ are answering banks' forays into their territory by increasing their syndicated loan activity, but have yet to make a major impact.

Loan Pricing statistics showed that the most profitable loans - leveraged transactions - fell to $17 billion from $25 billion the previous quarter.

Bankers said competition has driven pricing for investment grade credits about as low as it is likely to get. "On the non-investment-grade sector, the bad news is pricing is going lower; the good news the credit structure is strong," one banker said.

"We haven't seen the kind of deterioration of credit structure that we saw in the late '80s," he added, noting conservative levels of capital, leverage, and interest coverage.

"The equity component in a leveraged transaction today is somewhere around 20% to 25%," compared with 5% to 10% in the boom years, he said.

Chemical, the perennial leader in syndicated lending, again topped the ranking, acting as agent in 96 deals for $77.9 billion and a 22% market share. It led the biggest financing of the quarter, a $9.5 billion consolidation of credit lines for AT&T Corp.

J.P. Morgan & Co., acting as agent in 37 loans totaling $43.5 billion, ranked second, followed by Citicorp, with 61 loans for a total of $40.6 billion.

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