Magazine article American Banker

BT Derivative Opens Door to 3d World

Magazine article American Banker

BT Derivative Opens Door to 3d World

Article excerpt

Bankers Trust Co.'s international arm has launched a derivative product geared to institutional investors hungry for a higher yield but constrained from investing directly in emerging-market debt.

The new $1 billion facility, called Tops Limited, will let Bankers Trust compete with other large financial institutions in the creation of bonds backed by emerging-market debt.

"Over the past several years, we have become more client-focused," said Suzanne Quigley, a spokeswoman for Bankers Trust International in London. "This type of product goes to the sophisticated side of the market, the kind of investor that understands the risk management aspect of it."

The trend toward prepackaged facilities like Bankers Trust's has picked up in the past year. Merrill Lynch & Co.'s program is the oldest and largest, by far. Its Steers program, introduced in 1993, has issued $12 billion of notes.

As yields on debt securities have fallen over the past year, investors have looked to bolster yields by investing in emerging markets. However, the cost of buying debt securities in these markets and then initiating swap transactions to create the type of cash flows desired made it impractical for most investors.

The new prepackaged facilities let investors easily and quickly overcome such barriers.

"Through this program, we are able to offer an asset swap in a security form which can be traded as a normal Eurobond," said Raj Shourie, a vice president in the balance sheet structuring group of Bankers Trust's investment banking division. …

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