While the lineup — on down the tomb- stone/card — of Merck’s underwriters contains all the usual names, CFO Peter Kellogg’s choice of BNP Paribas Securities Corp. as the book-running lead suggests one of two things: (1) BNP Paribas offered “loss-leader” style-pricing to win the lead role, or (2) Merck is sending a message to the usual line-up of bankers — that their roles will not always be assured.
These sorts of huge traunche debt deals are — when issued by high-end, stable, seasoned issuer credits like Merck (and Apple) — essentially a license to print money, at the investment banks granted lead or co-managing roles.
The fee income (on commissions) is the first (smallest) piece, and on a deal of this size, the incremental work is tiny — compared to the size of the fee. But the real money is made in the after-market, as the investment bankers may engage in various “market stabilization” activities for several weeks after yesterday’s initial sale. “Stabilization” includes profiting handsomely on the aftermarket positions — as the banks may be both bookmakers, and traders, during this time frame.
From the overnight pricing sheet, filed with the SEC after 10 PM EDT last night — where to call to get a prospectus:
. . . .BNP Paribas Securities Corp. toll free at 1-800-854-5674, Deutsche Bank Securities Inc. toll-free at 1-800-503-4611, J.P. Morgan Securities LLC collect at 1-212-834-4533 or Morgan Stanley & Co. LLC toll-free at 1-866-718-1649. . . .
We will — as ever — keep you informed, but the other thing that’s clear from yesterday’s selection of BNP Paribas is that it was not undertaken to win favorable equity analyst coverage. Why? Because the investment house doesn’t follow Merck, on the equity side. Now you know.