When Travelers Group combined its Smith Barney Holdings with Salomon Brothers, it created a formidable force in the high-yield market. It had the largest sales and trading operation on the Street, and big ambitions for the coming year.

Salomon Smith Barney took fifth place in junk bond underwriting for 1997, raising $8.6 billion from 54 deals, and scooping up an 8.4% market share, according to Securities Data Co.

"We've had a bumper month in high-yield," said Chad Leat, co-head of high-yield capital markets and co-head of acquisition finance.

With the power of the combined firms, "we've done transactions we historically might not have lead-managed before," he added.

Travelers' purchase of Salomon Brothers closed in November.

Mr. Leat co-heads the combined firm's capital markets group with Steven Jones. His co-head for acquisition finance is Michael Klein, who also heads Smith Barney's financial entrepreneurs group. Smith Barney's James Zelter heads high-yield sales and trading, while Robert Waldman, of Salomon, heads high-yield research. The bank loan business is run by Salomon's Richard Ivers.

Salomon's Randy Barker oversees all of Salomon Smith Barney's high-yield operations.

Salomon Smith Barney has led a slew of junk bond issues since the two firms joined forces, including a $145 million deal for Delco Remy International, a $250 million issue for Sinclair Broadcasting Group, and a $175 million issue of preferred stock for Winstar Communications Inc., co- led with CS First Boston.

In addition, the combined group sole-managed a $100 million issue for Walbro and a $100 million issue for Wyman Gordon.

Mr. Leat expects the sheer size and footprint of the new firm to provide "more clout on the sell side," and "to ramp up the new-issue business" in the coming year.

Indeed, the sales and trading effort dwarfs most shops on the street. It includes 12 sales professionals, six traders, and five distressed-debt specialists.

"As the new firm has come together, we have gotten a competitive response from the commercial and investment banks," Mr. Leat said. "Winning is always difficult, but we have the tools available, so I'm optimistic."

The merger also provided a boost to each firm's acquisition finance business. In the past, about 15% to 20% of Salomon's high-yield business was with companies sponsored by leveraged buyout firms. Mr. Leat said he hopes to boost that portion to about one-third, on par with the market.

A large part of serving LBO firms is making bridge loans, facilities which are used for short-term financing before a high-yield issue. Smith Barney had already established a $1.15 billion interim financing alliance. Salomon's $1.2 billion Millenium Fund, already one of the largest of its kind, will be increased, Mr. Leat said.

The combined firm will have lead-managed 20 bank loans by the end of January, worth about $5 billion. Among the deals they have closed since the merger is a $1.4 billion bank loan for McClatchy News Inc.

Before Travelers bought Salomon, "both firms were just getting started," Mr. Leat said. But after the merger, the deal flow from financial sponsors has become "turbo-charged," he said.

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