Bank of Boston Will Join Rush to Underwriting High-Yield Debt

By Dunaief, Daniel | American Banker, August 27, 1996 | Go to article overview

Bank of Boston Will Join Rush to Underwriting High-Yield Debt


Dunaief, Daniel, American Banker


Bank of Boston Corp. has joined the growing list of bank companies trying to solidify claims on the nation's booming corporate finance business by adding underwriting to their menus.

The company recently notified the Federal Reserve of plans to apply for investment banking powers under section 20 of the Bank Holding Company Act. It could have such powers by the middle of next year.

Were the bank to get approval, it would the 40th commercial bank to win such powers. Including Bank of Boston, all of the top 10 leveraged lenders would have section 20 subsidiaries.

Bankers who have created such subsidiaries say they hope to double their leveraged lending revenue by offering a complementary high-yield bond service.

Not to enter the field, they say, is to risk erosion of one's leveraged lending franchise.

"To be a leading syndicator of bank loans, particularly to the leveraged market, you have to be able to offer a one-stop shopping capability," said Michael J. Zupon, a managing director at the NationsBanc Capital Markets subsidiary of NationsBank Corp.

"We're finding that investment banks that can access each of the capital markets have more credibility when making recommendations," Mr. Zupon said.

Bank of Boston is seeking to join the likes of Chase Manhattan Corp., Bankers Trust New York Corp., NationsBank Corp., and First Union Corp. just as the Fed is considering an increase in the ceiling on section 20 subsidiaries' underwriting revenues to 25% of total revenues, from 10%.

"For those commercial banks who find it important to be a leading arranger of syndicated bank loans, having the section 20 capabilities will be increasingly a mandatory requirement to participate in the market," Mr. Zupon said.

The bank loan and capital markets both have both grown considerably during the past five years. …

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