MERRILL Lynch will arrange a $400 million debt issue for a new entity, a special-purpose borrowing vehicle dubbed Sovereign Assets for Asian Regional Investors (SAFARI). Merrill Lynch head of debt security Colin Blackwell said the deal was originally intended to be only $300 million, but was being increased by 33 per cent. The investment bank arranged a floating-rate note (FRN) issue for SAFARI, which paid a coupon of 55 basis points (0.55 percentage point) over the three-month Hong Kong interbank offered rate, Mr Blackwell said. Managers and underwriters receive a combined fee of 15 basis points (0.15 percentage point), offering an all-in yield of 60 basis points (0.6 percentage point). Mr Blackwell said the FRNs would mature in three years, and added that SAFARI could make more appearances. 'Yes, we may well issue other issues using that name - SAFARI 2, SAFARI 3 and so on - but I'm not saying for sure that it's an on-going thing,' he said. This is the first Hong Kong dollar FRN for the year, with most issuers in Hong Kong dollars seeking to raise cash through floating-rate certificate of deposit (FRCD) issues. The issue would not be listed, Mr Blackwell said. He said SAFARI held Italian treasury bonds and a swap was involved in the issue. One bank which was invited to join the deal expressed reservations. 'Italy's not exactly the strongest economy in Europe,' a bank official said. 'Its debt is pretty horrendous.' He said he might join it because of the quality of the Merrill Lynch name. SAFARI's issue will be rated A1 by Moody's Investors Service and A-plus by Standard & Poor's Corp and is expected to carry a 20 per cent risk weighting under Bank of England-Bank for International Settlements guidelines.
