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Industry Spotlight > Broker Dealers

Top Two Corporate Bond Platforms Merging

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The two leading retail corporate bond platforms are about to merge. Incapital announced February 10 that it has entered into a definitive agreement with Bank of America to acquire its LaSalle Broker Dealer Services Division. The transaction will merge two platforms: InterNotes, managed by a joint venture between Banc of America Securities and Incapital, and Direct Access Notes or DANS, previously managed by LaSalle.

Why merge InterNotes and DANs? Incapital and LaSalle are “the leaders in providing taxable fixed-income products to broker/dealers,” Tom Ricketts, president and CEO of Incapital, said in an interview. Incapital has “been partners with Bank of America for a long time and BofA bought LaSalle Bank. BofA essentially had two entities that were servicing the same market, so we all agreed that Incapital would buy the LaSalle entity from Bank of America. We intend to take what’s great from the [InterNotes and DANs] platforms, combine them, and end up with a real significant player in the market.”

Ricketts pointed out that the combination of the InterNotes and DANs will “affect a lot of the broker/dealer firms” that sell the two products. “We should be able to give them better service by combining the platforms, the marketing efforts, and the products,” he says. The transaction is expected to close in the first quarter of 2008.

The merger couldn’t come at a better time as sales of InterNotes are booming. Incapital sold $1 billion of InterNotes in the first week of February–the “best week ever in seven years,” Ricketts says. Why such phenomenal sales? For quite a few years, “we’ve seen a flat or inverted yield curve, so there was no opportunity cost to leaving your money in a short end of the market. But now that the market has normalized in terms of the [yield] curve, people are looking out the curve to get a incremental yield. There are $3 trillion in money markets; if you don’t need that liquidity, people are going to have to looking further out the curve.

With the acquisition of LaSalle Broker Dealer Services Division, Incapital says it will:

– Serve as lead underwriter for nine of the 10 largest U.S. corporate retail bond issuers, including Bank of America, GE Capital, and HSBC Finance.

- Serve as a leading retail underwriter and distributor for U.S. Agency securities.

- Consolidate the efforts of two of the largest wholesalers in the rapidly growing market for structured investments (see

- Consolidate two of the largest underwriters of brokered certificates of deposit for U.S. banks issuers.

- Continue to operate a global fixed-income distribution platform for retail investors with a network of over 1,000 banks and dealers representing financial consultants throughout North America, Europe, and Asia.


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