With $227.5 billion of volume in the first quarter, the syndicated lending business is on a pace to surpass 1997's record $1 trillion.

The first-quarter total exceeded the $210.9 billion of the first three months of 1997. It trailed the $316.7 billion reported in the fourth quarter, which is when syndicated lending tends to be strongest.

"It is shaping up as another very big year," said Jasmin Chanana, research manager at Securities Data Co., which provided the statistics. "There is a lot of liquidity out there."

Chase Manhattan Corp. again led the industry, accounting for almost half of the first quarter's activity. The $94.4 billion that Chase managed rose from $84.6 billion a year earlier.

The quarter's biggest syndications were $5 billion for Deere & Co., $4.9 billion for Texas Utilities, and $4 billion for Lucent Technologies. Chase played a role in each of these.

NationsBank Corp. ranked second, with $56.5 billion, and BankAmerica Corp. was third, at $50.8 billion.

Banks' high levels of capital, stepped-up merger and acquisition activity, and a solid fixed-income market fueled the quarterly growth. The departure of Asian investors also had an impact, with agent banks being squeezed a bit on pricing.

"The market is going through a transformation that presents challenges and opportunities to issuers, investors, and agent banks," said Peter Gleysteen, managing director overseeing global syndications at Chase Manhattan. "What was once a simple business is now more complex if not volatile from time to time."

Higher-yielding syndications-loans priced well above the London interbank offered rate-were especially robust, with solid demand from both banks and institutional investors.

Highly leveraged loans at least 250 basis points above Libor were $26.9 billion, up from $10.4 billion in last year's first quarter. Leveraged loans at Libor plus at least 125 basis points grew to $75.5 billion from $31.2 billion.

"The big news is, we definitely have a buy-side-driven market," with investors stepping up so long as spreads and fees are equitable, Mr. Gleysteen said.

"People began to understand the effects of what happened in Asia and pricing firmed and brought stability to the market," said Kevin Sullivan, managing director of syndicated loan sales and trading at Bankers Trust Co.

There were some lingering signs of softness, especially for deals that rolled over existing loans. Some agent banks found themselves holding bigger than expected allocations because of the thin pricing.

"The investment-grade market remains far and away the most difficult," said John Finan, managing director in the loan syndications group at BankAmerica.

Indeed, deals that were not priced to reflect investors' heightened demands found fewer participants taking less of the packages.

Some agent banks made the necessary adjustments. "Some are in tune with the higher-yield needs of investors," one market watcher said. "As a result-particularly with investment-grade companies-some deals are going better than others."

Relationship-building was at times as important as pricing, Mr. Finan said. "That can give people a reason to go forward in an investment grade deal."

Though the league tables focus on dollar volume, some bankers say they have other measures for success. For instance, First Union Corp. focuses on the number of deals it acts as agent for.

"We had a lot of activity, with our number way ahead of last year," said Robert Healy, managing director of First Union's loan syndication group.

He credited the number-38-to "an active deal market and our position as a growing franchise."

First Union plans to further raise its profile. Indeed, the company late last week committed financing for Richfield Holdings' $207 million planned purchase of Dart Group Corp.

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