Bank of America purchase of Merrill Lynch could increase loan issuance

By Sara Rosenberg

New York, Sept. 15 - Bank of America Corp. announced on Monday that it is purchasing Merrill Lynch & Co. Inc., raising the question of whether the acquisition will help it dominate leveraged loan issuance.

"Merrill was pretty small over the years in primary issuance and what Bank of America retains will have to do more with the bankers they retain than buying the Merrill name," a buyside source told Prospect News.

"Maybe a little more importantly, if Bank of America's empire is larger and successful, they might have more capital to put behind their primary effort," the source remarked.

According to Prospect News' figures, as of the end of August, Bank of America was seated on top of the league table of leveraged loan arrangers and had been there for four consecutive months. It had been leading for the year through March, but JPMorgan pushed ahead in April for a single month before Bank of America retook the title.

Through Sept. 15, Bank of America had brought to market $28.15 billion of deals versus JPMorgan's $20.20 billion out of a total market of $214.06 billion. Merrill placed 13th at $4.90 billion.

However JPMorgan had led for all of 2007 and 2006, bringing $110.19 billion in all of 2007 versus third placed Bank of America's $85.97 billion and eighth placed Merrill's $32.64 billion in a year that saw total issuance of $735.96 billion. In 2006, JPMorgan brought $105.69 billion while Bank of America was second at $82.91 billion. Merrill placed eighth at $20.47 billion. Total issuance was $612.27 billion.

As for how this move will affect the secondary market, the source explained that Bank of America will probably try to get up to speed on trading Merrill's names as quickly as possible "to avoid losing that home court advantage."

Bank of America is buying Merrill Lynch in a $50 billion all-stock transaction, under which Merrill shareholders will get 0.8595 shares of Bank of America common stock per share.

Bank of America said that after the transaction it would be the number one underwriter of global high yield debt, the third largest underwriter of global equity and the ninth largest adviser on global mergers and acquisitions based on pro forma first half of 2008 results.

The transaction is expected to close in the first quarter of 2009, subject to shareholder votes at both companies and standard regulatory approvals.

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