Merrill Lynch & Co. and Morgan Stanley Dean Witter & Co. were two of the three lead arrangers on the third quarter’s largest syndicated loan, illustrating how securities firms are using credit to round out their investment banking services.

The $10 billion credit, which spiked the two firms’ standings in Thomson Financial/Securities Data’s third-quarter leveraged lending league tables, went to Georgia-Pacific Corp., a lumber and paper products company in Atlanta that produces Angel Soft toilet tissue, Sparkle paper towels, and other products. Georgia-Pacific needed the financing to buy rival Fort James Corp. Merrill, Morgan Stanley, and Bank of America Corp., the other lead arranger for the syndicate, advised on the deal.

Securities firms have charged into commercial banks’ lending territory in recent years. They have a keener taste for the more profitable leveraged lending, but recently these firms have been offering credit to investment-grade companies as a way of securing other investment banking business.

Though Morgan Stanley considers the Georgia-Pacific deal as investment grade, the credit, priced at Libor plus 125 basis points, just classifies as a leveraged loan, according to Securities Data.

Morgan Stanley jumped to fourth place from 16th a year earlier in the leveraged loan league table, having led $5.4 billion of deals, for a 5.8% market share. In the same quarter last year, the firm had led $1.4 billion of deals, for 1.4% market share.

Georgia-Pacific was Merrill’s sole syndicated credit last quarter, but the $3.3 billion was enough to rank it seventh with a 3.6% market share. The year earlier it was ranked 12th, with $2 billion of deals and a 2% market share.

The Georgia-Pacific deal helped Bank of America swap places with Chase Manhattan Corp. for top spot on the leveraged loan table. Bank of America led $24 billion of leveraged loans, for a 25.6% market share, up from $23.9 billion and a 23.6% market share the year earlier. Chase led $17.7 billion last quarter, for an 18.9% market share, down from $32 billion and 31.7% the year earlier.

“In addition to solidifying our position as the dominant arranger of leveraged transactions, we are particularly pleased that during the third quarter we gained considerable share in the overall market,” said Arrington Mixon, global head of syndicated finance at Banc of America Securities.

In overall syndications, Chase retained its top spot, leading $86.7 billion of deals, for a 29.2% market share. That was a decline from the same quarter last year, however, when Chase led $99.1 billion of syndicated loans for a 32.6% market share. Bank of America, in second place, led $84.7 billion of loans, for a 28.5% market share, up from $70.8 billion and 23.3% a year earlier.

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