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The perception of Nordic borrowers as small fry is outdated. True, issuers in the region have traditionally enjoyed the rich pickings of their domestic banks and investors. But this is changing. Consolidation is accelerating in Scandinavia and many large borrowers have outgrown their domestic market. Investors keen to exploit new potential are eyeing the Nordic credit story and dealers believe they won't be disappointed. Non-syndicated issuance by Danish, Finnish, Icelandic, Norwegian and Swedish issuers combined, was $26.71 billion last year - a $10 billion increase on 1998. Tony Lindlof, deputy-head of debt capital markets, at Handelsbanken Markets (Handelsbanken), predicts issuance by Nordic borrowers will pick up speed as domestic funding becomes increasingly limited. He says: "Many Nordic borrowers are too big for the banks and their lending capacities. And the Swedish domestic MTN market is too small for larger corporates and banks. It used to be cheaper to borrow domestically, but Swedish investors have taken a look at the international markets and seen the spreads. As a result domestic levels have come more in line with them." Dealers expect that the trend for consolidation in the Nordic region will affect the market. Newly merged entity MeritaNordbanken is likely to increase its issuance to fund a possible takeover of Christiania Bank. Justin May, director, global origination at ABN Amro, says: "We're definitely going to see more names out of the region, particularly Sweden. Much issuance by Nordic borrowers will be driven by M&A activity." An increase in corporate signings from the Nordic region is also expected. Klaus Svendsen, vice-president, Euro-MTNs at Morgan Stanley Dean Witter (MSDW), says: "Scandinavian borrowers traditionally have been the major banks and sovereigns, but more corporates are coming on board now." In March 2000 Swedish law will let companies buy back their stocks. Lindlof, at Handelsbanken, says: "Corporates are cash rich so they don't have great appetite to enter the market at the moment. But this could change in March. Issuance may increase from corporates looking to fund buy-backs." Norwegian law stops local authorities from issuing debt internationally. But Kommunalbanken, a state-owned bank, will use its euro2 billion ($1.95 billion) facility, signed last month, to provide funding for these municipalities. Thomas Moeller, finance director at Kommunalbanken, believes it can be hard for new Nordic credits to get recognition and says he sought advice from other borrowers before signing. Yet, he is concerned that with growing competition many Norwegian borrowers will be left out in the cold. He says: "This market is for really good credits and good names. I don't know how many Norwegian borrowers will be able to access the market in 2000. Many don't have a rating and for this market a rating is crucial." All new borrowers strive to stand out in the pack. And for unknown Nordic credits the battle can be even harder. FBA Icelandic Investment Bank (FBA) was a novice in international capital markets when it signed its programme, in 1999. And as many investors don't have lines open for Icelandic names, the issuer had its work cut out. But Sigurdur Nordal, senior funding manager at FBA, is delighted with its success. He says: "We've been totally focused on this market for our funding in 1999. Since only very few of our investors have bought paper from an Icelandic credit before, we placed a high value on reaching new investors. It's also important to work with dealers, to be flexible on structures and quick in responding to ideas." And FBA's activity has had much wider scope. Svendsen, at MSDW, says: "FBA has managed to diversify and, at the right price, access investors in Japan and Europe. Many of these investors have been new not only to FBA, but to Iceland as a region. So FBA has been able to expand the total credit available to Icelandic borrowers." Its strategy will no doubt be an inspiration to others. Nordal says: "Given FBA's success, I would not be surprised if other Icelandic borrowers are following our performance and even considering the market for themselves." Merrill Lynch traded $99.9 million for FBA last year. Mike Bransford, associate, Euro-MTNs at Merrill Lynch, admits more work was required to get results. He says: "For new borrowers we have to play a bit harder on the ground. But there is value out there. FBA was not a well-known name, so it was more difficult for them in the beginning. But with hard work it can be done." More signing activity will heighten competition, but there is a positive side. Per Akerlind, treasurer at Svensk Exportkredit (SEK), the most active Nordic borrower in 1999, believes a surge in issuance from Nordic borrowers will attract the attention of investors throughout Europe. Akerlind says: "Scandinavian corporates have achieved good terms in their borrowing domestically, and to some extent from the international markets, but I think they will concentrate on broadening their investor base now. And, as more issuers sign, investors will increasingly focus on this area. It is interesting to note that four or five years ago, London banks reduced their focus on Scandinavia because it did not generate enough good business. This is definitely changing again."

? Carrefour SA Rating: Aa3/AA-

Unlike the budding DLJ, Morgan Stanley Dean Witter (MSDW) has been a formidable player in the Euro-MTN market since the market's early days in the late '80s. Olivier Jalouneix has led the desk for the last five years, finishing top of MTNWeek's issuance league table and euro issuance league table for 1999. And Jalouneix's work, in making MSDW one of the leading MTN houses, was rewarded in March, this year. He has been promoted to head of the bank's financial institutions group in Europe. For Jalouneix, the launch of the single European currency last year led to the most dramatic opportunities in the market to date. He says: "The onset of the euro is the biggest milestone for me. Sure it means there are less arbitrage opportunities in Europe but it has led to the development of a plain vanilla market. This means we can create liquidity from large single transactions sold directly to a pan-European investor base." He joined MSDW's corporate finance department in 1989 before moving into capital products and subordinated debt. In 1994 the bank centralized its MTN activity into one desk which, by the following year, Jalouneix headed-up. He's one of the few MTN dealers to have stayed with the same bank for over 10 years. Maybe he'll reap rewards for his loyalty as the number of banks active in the market is reduced either by consolidation or by the fact that, to survive in today's market, each bank has to be a global player. Jalouneix says: "We're already seeing a concentration of the Euro-MTN business with a small number of dealers. There are still some niche markets but we will see less and less of them. In the medium term there will be a core number of global players able to satisfy all pockets of demand." But satisfying demand in today's marketplace means being able to compete for business over the internet in real-time trading and settlement. Although Warburg Dillon Read was the first bank to move into online Euro-MTNs, last year, most other banks are now in the process of setting up systems if not already using them for vanilla transactions. Jalouneix supports the move to an electronic marketplace but sees it more as an aid to the present market set-up rather than the creation of a totally new market. He says: "Online trading is a great facilitator to business. It will make it faster and more responsive. But it won't revolutionize the market. You will still need people-to-people contact. What it will do is help us to focus on more value-added trades by taking care of standardized transactions automatically."

IPO ACTIVITY continued apace on Itaty's Nuovo Mercato this week with a slew of offerings, including EPlanet, CTO and TC Sistema, taking the total of new issues on the fledgling market to over 20 since the beginning of 2000. Bankers said that while the steady flow of offerings into August was encouraging, the high volume of new issuance was partly due to delays by the COB. "The closer we have got to August, the slower it has become," said one disgruntled banker.

Peter Jackson has been with Salomon Smith Barney (SSB) for 11 years. He is now heading the desk, which was awarded best Euro-MTN house of 1999, by MTNWeek. As the bank swallowed up the retail distribution capabilities of Nikko and Citibank under the mergers with Travelers group, it grew to become an MTN machine. Jackson arrived in MTNs via two-and-a-half years each in derivatives research and Eurobond trading. One thing that Jackson is grateful for after six years in the market is the development of efficient systems both technical and non-technical in the market. He says: "In the old days we would get enquiry from Japan and deal with it over-night. But it wouldn't be traded until three days later. Nowadays it all happens intra-day. It's a much more efficient market now. When I started we used to write down everything we knew about a borrower in a little black book. For the last few years it's all been database driven. The need to retain information in your head is much less. That's a big change." But as the market became more sophisticated, so too did news reporting techniques. And the level of transparency is increasing year on year. But a small margin of trades still fall between the cracks of information services such as Capital NET and MTNWatch. Jackson believes keeping a low profile on some trades is not only preferable from a profit-making point of view, but also necessary to please certain investors. He says: "The market's far less secretive than it used to be but this is not something that's particularly desired by arrangers or investors. It's a private market for a reason. Investors don't want what they're doing to be advertised. Plain vanilla is reasonably transparent but there is still some degree of clandestine transactions going on in structured business. These are the most profitable trades so you obviously don't want them publicized." As for the future, Jackson sees a clear distinction between what will happen with plain vanilla business and how the structured market will develop. E-commerce has started to affect MTNs. He says: "[Online trading] will partially revolutionize the market. It will definitely increase market efficiency generally and especially on the plain vanilla side which is volume-driven and not that profitable. And I believe it will mean marketing ideas will be done electronically. But trading structures is much too complex for internet trading. We [as dealers] operate in an advisory role and the way you add value is by understanding the customer and his needs. That's done verbally."

? DePfa Deutsche Pfandbriefbank AG Rating: Aa3/AA (Moody's/Fitch)

Banque Nationale de Paris (BNP) and Paribas officially merged on May 23 this year and the two MTN desks have had to reorganize. Two of the eight traders had to go and BNP must move its staff from Paris to Paribas' dealing headquarters in London. After six weeks the team is still separated by the Channel, but it has every reason to look forward to establishing a significant presence in the international market. BNP Paribas is the biggest bank in France with 77,000 employees working out of 83 countries. It can now also claim to have one of the most experienced MTN desks in the market. But the battle that took place will have left deep scars, and it is vital that the merged entity makes the most of its extra resources. The new bank ensured members of the team were committed by having the traders re-apply for their positions. Daniel Cogoi, previously head of the Paribas desk, now global head of MTNs at BNP Paribas, says: "It was a soul-searching exercise. It reminded me very much of a firm starting up a new MTN desk. And we should all see it as joining a brand new team. It's not BNP here and Paribas there, it's BNP Paribas." But many issuers are concerned that a trend of mergers like this could lessen competition for dealerships by decreasing the number of banks. And as dealers increase their client base, the time spent on each particular issuer will inevitably fall away. BNP Paribas is a dealer off European Investment Bank's (EIB) two active Euro-MTN programmes, and is co-arranger off one. Joseph Vogten, head of division, capital markets, at EIB, does not think issuers will suffer from a lack of attention. He says: "We have very little experience of this happening. Even if it does you can increase the level of communication and eliminate any worry." Cogoi moved to Paribas from Citibank in 1993 and has a clear idea of how to run the new desk. He intends to give the team members their own areas of responsibility, specializing by issuer nationality and issuer type. Benedicte Guerin-Cribier, ex-head of private placements at BNP, now deputy-head of MTNs at BNP Paribas, says: "It's a very efficient way of working because a request from an issuer can be dealt with by a specialist." BNP Paribas is on the dealer panel of 24 of the 71 programmes signed this year, according to MTNWare, and is consistently in the top 10 for volume traded, according to MTNWeek criteria. This year it has done trades raising $3.27 billion, taking a 3.77 ket share. Cogoi says: "Frankly I've been positively surprised that volumes and client business have been so robust throughout the merger process." In April last year Paribas entered the MTNWeek top 10 bookrunners. It shot up the ranks to a market-share high of 6.88 n July. But in the last few months of 1999 the bank saw a drop in trading volumes that then levelled off at around 3.85 This is around the time BNP would have been getting involved. Though this may have been a natural dip after the hard, fast climb, other areas of the merger were a strain. Cogoi says: "The toughest part is the time it takes. We are all smart, motivated people and want to get on with the job. The wait was what was killing us." Deutsche Bank and Dresdner Bank's bust-up earlier this year was due to disagreements over the future of Dresdner's investment-banking arm. Similar overlaps existed between BNP and Paribas, but everything has moved forward smoothly. Guerin-Cribier, who was with BNP for three years, says: "We face the same problems as every MTN desk. This merger is just one step. We will all work to our strengths and there is no reason why we won't be able to handle it." But job cuts are expected, mostly in the IT departments, as one of the two computer systems is to be abolished. The biggest change, however, will come in the new areas accessible to the desk. BNP Oakreed is a subsidiary based in Hong Kong, and is likely to be a key player in the team's efforts to access this side of the market. As yet it has not touched the MTN sector and Cogoi is keen to urge it to do so. Other Asian currencies will also be available for increased trading, and the US market is another area the team will be trying to expand into. And the M&A activity is far from over. With calls for consolidation in Europe bouncing around the market, banks are flirting with each other. SG, after its embarrassing knock-back, forged an alliance with Spain's Banco Santander Hispano. And HSBC's presence in France after acquiring Credit Commercial de France could spur a flurry of activity. But Cogoi does not think BNP Paribas will get involved. He says: "As far as external growth is concerned, the focus is more on acquisitions within certain businesses we want to develop, rather than on a full-blown merger." The bank is trying to buy out the Belgian holding company Cobepa, but seven of Cobepa's 23 board members are unhappy with the offer. And there are plans to team up with supermarket chain Carrefour to offer on-line financial services. It has also set up a UK corporate trust department, practising the big-is-best philosophy that convinces so many banks. And issuers seem happy with the way things are going. Vogten, at EIB, says: "The market is still fertile and dynamic enough for the parties involved to make promises and be able to deliver them. Mergers like this always increase knowledge and expertise."