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  • Bank capital is set to dominate the primary markets this month, as issuers take advantage of a recovery in subordinated spreads, which had widened significantly in October, and investors look for yield enhancement by playing the capital spectrum. This week, lower tier two debt featured strongly in the euro sector, with BBVA raising Eu750m of 10 year non-call five bonds and Banco Popolare di Lodi Eu150bn of seven year securities. But both deals encountered hurdles.
  • UBS Warburg launched a surprise $2.42bn zero coupon convertible for ST Microelectronics at the end of last week with terms that were viewed as exceptionally aggressive. The 10 year bond was the largest zero coupon convertible, achieving the highest premium on a convertible this year: a staggering 45%.
  • Uncertainty weighed on the tobacco sector this week amid the debacle surrounding the result of the US presidential election, with investors to a large extent keeping to the sidelines. Already beset by serious litigation problems in the US, tobacco companies were eagerly awaiting the election result, which will be key to predicting further developments in litigation, as well as in future regulation of the industry.
  • Energy utility TXU Europe took advantage of the inverse yield curve in the sterling market by selling a 30 year put option to Morgan Stanley and UBS Warburg, followed by a Eu500m five year bond issue lead managed by the two banks and priced on Monday. The triple-B bond issue was TXU Europe's debut issue in euros and the transaction also marked the first time that puttable bond technology developed in the US has been introduced in the European market.
  • Deutsche Bank and Nomura Bank International are arranging a $1bn revolving credit for Nomura International plc. The deal is split into two tranches - 'tranche A' is a $600m 364 day facility paying 27.5bp, and tranche 'B' a $400m two year loan priced at 30bp over Libor. Commitment fees are 11bp and 12bp respectively.
  • Globals: * CIT Group Inc
  • Klepierre, the property unit of BNP Paribas, has postponed its Eu250m capital increase due to lower than expected demand and what appears to have been a concerted campaign to undermine the stock price. Books opened on October 25 and were due to close on November 8 for institutional investors and November 13 for retail investors, with pricing scheduled for November 8.
  • * Banque Fédérative du Crédit Mutuel Rating: A1/A+