Puny Salvador Fee Repels Banks

Bargain basement fees on El Salvador’s upcoming dollar bond issue have driven away potential bookrunners, leaving Deutsche as sole lead, according to DCM bankers familiar with the process. Deutsche is heard having accepted just 1bp to win the mandate. The issuer wanted additional leads at the same price, but other banks refused. “No other house would do it jointly for those fees,” says a banker close to the process. The Central American sovereign has a history of awarding bond deals for very little commission. It typically saves thousands of dollars in fees only to lose multiples of that in cheap pricing. Deutsche has had a good run in the LatAm debt league tables this year, so it appears not to be making a desperate bid for volume credit. However, it is understood to be keen to start a relationship with El Salvador, which is heard considering a $700m 10-year. Bankers say El Salvador is not leading a general trend of lower DCM fees, and that frequent sovereign issuers will still pay. “There have been a few tightly bid contests this year, but it’s not a widespread trend,” says a banker who pitched El Salvador. He adds that banks can still count on 25bp-35bp from a typical low investment grade frequent issuer in the region on a 10-year plain vanilla deal. Average fee per transaction is up sharply in 2010, according to Dealogic. Total LatAm DCM revenue was $243.00m for the year to October 15, on $84.13bn volume from 153 transactions. This compares to $244.00m for the corresponding period of 2009, coming from $66.11bn volume from 287 transactions.