Leveraged lending soared to a record $46 billion in the second quarter, up 52% from the first.

Driven by an active merger and acquisition market, a steady stream of refinancings, and high levels of liquidity, the leveraged loan market rebounded from a first quarter that saw only $30.5 billion in volume, according to Securities Data Co.

Bankers said they expect third-quarter leveraged activity will remain high, possibly even increase. "The funds continue to have a lot of money to invest, and as a result, while prices are high, there is still a lot of buyout activity driven by the liquidity in the market," said Jay Allen, senior managing director in leveraged finance at BankAmerica Securities Inc.

Chase Manhattan Corp. topped leveraged lending league tables for the first half of the year. It syndicated $24.9 billion in 99 deals-for a 33% market share, according to Securities Data.

The tally focuses on loans priced at least 125 basis points over the London interbank offered rate. That is considered a relatively broad measure of leveraged lending; some address deals priced at least 150 basis points over Libor.

Bankers Trust New York Corp. ranked second for the first half of the year, with $19.6 billion in 50 deals. But the company took first place in loans made during the second quarter, syndicating $13.8 billion in 31 loans, for a 30% market share.

"The mix we had between (buyout firm) business, double-B credits, increases from existing clients and investment grade credits is great," said Kevin Sullivan, senior managing director for loan syndications at Bankers Trust.

Goldman Sachs & Co., meanwhile, became the first investment bank to break into the top 10. It ranked eighth for the first half, with $2.6 billion in volume. "Our investment bankers are pitching the bank loan product with the same enthusiasm as our other, more traditional investment banking products," said James M. Karp, vice president and syndicate manager in the firm's bank loan group.

Although Goldman in 1990 was one of the first investment banks to enter the loan market, it began its origination effort in 1994. "We are looking forward to a very, very busy third quarter," Mr. Karp said.

New institutional investors in the leveraged market, such as prime rate funds and insurance companies, continued to clamor for high yielding leveraged loans in the second quarter.

"The big driver is the liquidity in the institutional market," said Amy Miller, managing director and head of syndications at Toronto Dominion Securities Inc., which ranked sixth for the first half.

"Our issuers realize how liquid both the bank and high-yield markets are, and are taking advantage of it at very attractive rates and a lot of liquidity, which is driving structures and pricing," she said.

The largest leveraged loan of the quarter, according to Securities Data, was the $3 billion credit for supermarket chain Safeway, led by Bankers Trust, BankAmerica, Chase, Bank of Nova Scotia, and Bank of New York Corp.

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