Company newspaper

I have written an internal newspaper in English for BNP Paribas' Commerce and Investment Bank

I write creative articles to highlight your company's employees and the strides you are making in your business sector.

Articles internal newspaper BNP Paribas (Finance 20 - 2007)

I wrote sixteen articles for CIB's internal newspaper distributed to fifteen thousand employees.

Cash Management or how BNP Paribas earns loyalty from its clients

In a rapidly evolving environment, Cash Management provides BNP Paribas with an ideal opportunity to innovate and be at the heart of our clients’ day to day needs. Interview with Bruno Lavolé, Head of international Cash Management.

What are the implications of the “Cash Management” activity within the Bank?

It’s worth remembering that Cash Management is at the core of a company’s Treasury Management. In effect, the client entrusts the company’s revenues and short term liquidity to its banker. Changing banks is onerous for treasurers and, once the client is on board, he will generally remain with us for at least five years. These are reasons enough for BNP Paribas to consider Cash Management as a strategic business. It is the backbone to building long term relationships with our clients and literally ties them to the Bank! Of course, this also requires a constant quality of service.

What is Cash Management’s role and spectrum?

At stake is the Corporate Treasurer’s ability to manage the operating cash flows and to optimize and control short term liquidity. Cash Management provides the right technique to accelerate the collection of receivables, to standardize and automate the payment processes and to efficiently manage and control liquidity on a global scale but with a centralized axis. Moreover, all of this must be in real time!

Could you give us a broad perspective on BNP Paribas’ clients and presence worldwide?

We service more than 4,000 groups worldwide of which 300 are large multinationals, representing 25% of our revenues. Within CIB, we can implement Cash Management solutions in close to 30 countries, including all the major economic areas. This includes our leading platforms in France and Italy through BNP Paribas’ retail networks and in the IFRS Territories.

In a field where all major players have strong technical platforms, our highly personalized strategy differentiates us from competitors who hand their customer support off to remote call centers. We will go the extra mile to demonstrate our commitment on a daily basis.

Our footprint covers Western Europe, but we also have direct coverage in countries such as Hungary, Poland or Bulgaria and we aim to step up our presence in the rest of Eastern Europe where we have developed strong partnerships with domestic banks to extend our coverage. In North America, we have the ability to provide the highly automated cash management processes required by our clients. Asia is certainly one of our fastest growing markets.

What about BNP Paribas’ technical tools?

While Cash Management traditionally drew on heavy back-office and IT infrastructure, technological evolutions have facilitated the automation of processes, lowering significantly the marginal processing costs.

By combining straight-through processing capabilities, liquidity management tools (automated cash concentration), internet based online cash management solutions (Connexis) or other state of the art solutions like Swiftnet, we are able to focus our efforts on larger corporations operating in a “business to business” environment. At this higher end of the business chain, transactions are more automated.

What is our edge compared to our main competitors?

Automated processes can often feel impersonal and indiscriminate. At BNP Paribas we will not let that happen. Our ISO certified Solutions Design & Implementation department (SDI) works closely with the client to structure and implement solutions adapted to his specific needs. SDI stands out by offering an innovative, secure web-based collaborative workplace, “eRoom”, that allows a corporate client to communicate interactively with his dedicated project manager.

To answer our more demanding clients’ requirements, our Cash Customer Service (CCS – ISO 9001 Certified) provides a highly personalized day to day support. Acting as a single point of entry and sole contact, it offers the expertise of 40 multilingual financial and technological experts. CCS regularly evaluates the level of satisfaction of its clients. Major clients are also assigned to dedicated account managers ensuring that our offer always meets their evolving needs.

So what is the scope of your commercial taskforce?

Paris based teams, within the Cash Management business line of BDDF (Ligne d’Activité Cash Management or LACM), constantly develop new solutions and provide a centralized support when necessary.

Within CIB, our 75 professionals in more than 20 countries are dedicated to servicing the clients and finding the best solutions to answer their needs at every phase of the cash management cycle.

We also work very closely with our operations teams, bearing in mind that one client can produce a quantum leap in volume with sometimes as many as 10,000 extra transactions a day! This provides us with plenty of incentives to increase the scope and efficiency of our products and services. Each new client and each new service requires a high level of implementation. We have to make sure that our technical specialists and the sales staff understand the clients’ needs.

Cash Management requires strong technical platforms and highly specialized professionals. However it utilizes a comparatively small amount of the Bank’s capital.

What has the CIB as ‘One bank’ strategy brought to the business?

The integration of CIB as One bank encourages an increase in our business. The real catalyst is in the cross-selling structure where most of the synergies occur. Many of our clients looking for efficient Liquidity Management solutions also need Foreign Exchange, Trade Finance, or Short Term Fund Management solutions. Together with these business lines we work to provide all -in -one solutions to the clients’ needs.

How do you keep the momentum going?

BNP Paribas is already the leading Cash Management bank in France. Our first priority is to be the preferred choice for our Corporate clients in Europe. We are also working on developing our offer in Asia where the demand for Cash Management solutions from multinational corporations is gathering pace. CIB’s client managers should understand that Cash Management is a core asset in establishing long-term client loyalty.

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Green-minded “Carbon Trading” team created

BNP Paribas is regrouping its carbon trading activities under a single “Carbon Team” with the critical mass to better serve a growing number of BNP Paribas clients and generate new opportunities across the Bank.

In order to combat the Earth’s climate change which is due to the emission of greenhouse gases by mankind, the Kyoto Protocol and the European Union Emission Trading Scheme (EUETS) have been adopted, creating de facto new, rapidly growing markets: BNP Paribas and CIB have participated in the EUETS since its inception in 2005, a scheme which will run until 2012, and is likely to be extended until 2020. ECEP had developed competencies through its Business Development and Commodity Derivatives activities. It is now regrouping its carbon trading and financing activities in a single “Carbon Team”. The mission of this new London-based team is to inform clients and enable them to seize opportunities related to trading and financing CO2 emission permits.

This new “Carbon team” is headed by Simon Dent who is Head of European gas and power trading and marketing. “Our view on this market is that Carbon should be considered as a new asset class rather than a specific activity” he explains. The “Carbon Team”, is also acting as the interface between CIB’s business lines and territories. In 2006 the financial value of carbon trading within the EUETS, the Clean Development Mechanism (CDM), and the Joint Implementation (JI) projects was worth approximately 22.5 billion euros.

BNPP offers a complete range of CO2 risk management solutions to companies under the European emission trading scheme. Financial risk solutions include order placement, fixed-for-floating swaps and indexed sales or purchases, options and emissions repurchase structures.

For companies developing CDMs, or JI projects, BNP Paribas’ offer addresses the whole carbon value chain with a complete range of financial and trading services; every stage of development of carbon projects is included from conception, development, to implementation and production. To lead this effort, Sylvain Goupille was named Deputy Head with responsibility for Financing related Businesses.

BNPP is one of the leaders in the EUETS and Europe is at the forefront of environmental policy implementation. So as other continents catch up with Europe, the world’s the limit as far as cross-selling opportunities go!

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MiFID spells changing world for CIB

The MiFID directive will alter the way CIB works, but preparation is the name of the game. Explanations with Etienne Valence, Global Head of Compliance.

Can you tell us what this new directive is all about?

The Markets in Financial Instruments Directive, known as MiFID is a cornerstone of the European Union's plan to move toward a single market in financial services, and is due to take effect from November 2007. The directive embraces both wholesale and retail trading and sales in securities including shares, bonds and derivatives. As such, it will affect all the core business lines of the bank and not only CIB.

The directive has three stated goals: protecting investors, removing stockmarkets' monopolies and increasing transparency.

What are the main challenges raised by MIFID?

First, MiFID classifies clients along three levels of protection: “eligible counterparties” (“ECP”), “professional” clients and “retail” clients. While eligible counterparties must confirm their agreement to be treated as such, both professional and retail clients must be informed before handling their transactions. Each client may opt in or opt out of classifications according to the financial instruments, even on a deal by deal basis! The classification determines the level of suitability and information due to the client and also best-execution.

What are the consequences for the bank

BNP Paribas must reclassify eight million accounts which may overlap between retail banking and CIB. So the classification will have to be handled on a group level. Our challenge will be to adapt our processes and tools to allow clients to opt in and out on a group scale!

Second, MiFID levels the playing field between trading platforms. It allows the creation of Multilateral Trading Facilities or the internalization of orders, ending the current monopolies of bourses in certain countries and enhancing competition. This is an opportunity for banks to reduce the cost of execution to their clients. They can do it either by matching client orders against their proprietary trading book thus creating internal platforms or they can use newly created off-exchange trading platforms.

Thirdly, MiFID promotes more transparency through “Pre-trade transparency”, firms being required to publicly issue their prices for equity, as well as “post-trade” requirements. Transparency also leads to the drafting of a “best execution” policy which covers non ECP clients! CIB will have to provide their clients with these rules and ensure their accuracy on a regular basis. Obviously, pricing is the main factor involved along with “speed of execution” and “probability of execution” but modeling contsraints and hedging possibilities could also be taken into account for OTC transactions. And it doesn’t end there, since this policy must be reviewed on a yearly basis!

Lastly, conflicts of interest will have to be clearly mapped out and made public. In keeping with the new law, conflict resolution procedures have to be put in place and a log must be kept. We need to further enhance our procedures and tools in order to detect potential issues and as a result disclose more information to our clients.

Is MIFID a new big bang?

Without a doubt, CIB’s processes and tools will primarily be impacted by client classification and best execution. For all of the CIB business lines, MiFID will require more formalisation of our client relationships and more information to be provided to them (pre-trade transparency, best execution policy). Business lines and their staffs are working on the implementation to be ready by November 1st. In summary and to answer your question, yes in the short term, we expect new constraints, but in the medium term, by ending the exchanges’ monopolies, MiFID may also create new opportunities!

To learn more about MiFID, click on the CIB Compliance intranet link (http://b2e.group.echonet/b2e/portal/p/tc/monmetier/bfi/ethique/)

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Germany: Heading for the highway!

The German corporate and investment banking market is a highly competitive one, but with recently reinforced teams and in the wake of prestigious client deals, BNP Paribas is determined to raise its profile.

With all the attention devoted to China, it is easy to forget that Germany is still the world's top exporter. Riding on emerging markets growth, the German export machine is back in top gear and GDP registered growth of 2.9% in 2006. This explains why BNP Paribas and CIB intend to significantly boost their market share in coming years.

While BNP Paribas’ presence in Germany dates back to 1947, it can still be considered a relative newcomer in the field of corporate and investment banking. This is due in large part to a cross-shareholding partnership between BNP and Dresdner that lasted until the late 1990’s and involved an agreement not to compete aggressively on each other's home markets. The two banks still operate a joint venture in the field of consumer lending: Dresdner Cetelem Kreditbank.

"In Germany, Paribas was a niche player operating in capital markets and advisory services and less of a relationship bank," explains Joachim von Schorlemer, Head of Territory for Germany.

“Paribas used to serve large German corporates out of Paris, but primarily for their needs relating to the French market.” explains Carsten Esbach BNP Paribas’ COO, “We were far from being one of their core banks, which you can only be if you are operating on the ground, close to the client’s head office,".

The real shift towards sustainable relationships with German corporates started with the merger with BNP and intensified from 2001 onward, when CIB really reinforced its franchise building up its teams.

"We have made significant progress," continues Joachim von Schorlemer. "2003 was the first year BNP Paribas made its mark as a rival to the established competitors in the corporate and financial institutions space. This space is very crowded and we are up against the incumbent German banks, the major bulge bracket US firms and our European peers. We have managed to build on our relationships with large corporates and in 2005 we initiated a program to address the Mittelstand, Germany's remarkably dynamic small to medium enterprise sector. CIB caters mainly to German companies with sales exceeding a billion euros a year and financial institutions, local authorities, public sector companies and utilities”.

While competing with traditional German players on their home turf can be a challenge, given their long-standing relationships with local corporates, Joachim von Schorlemer is confident that CIB can grab market share, as companies become increasingly pragmatic. "They are not dogmatic in their loyalty to their traditional German core banks," he explains. "It is quality and price that determine their degree of loyalty." In fact BNP Paribas' German corporate and investment banking activities grew their revenues by 50% in 2006 and can already boast several very prominent clients.

Thanks to an established client relationship, BNP Paribas joined the group of financing banks for the highly publicized attempt by German energy giant E.ON to acquire its Spanish counterpart Endesa.

Last year, BNP Paribas was also one of three banks financing Bertelsmann’s repurchase of the 25% stake Albert Frère owned in the German media group, while also acting as an advisor to the Belgian magnate. More recently, the Equity Capital Markets division has been assisting pharmaceutical giant Merck with its capital increase.

The bank also scored high profile deals in the insurance sector, arranging catastrophe bonds for reinsurers Munich Re and Hannover Re.

In fact, while his teams will continue to work on improving their position with German corporates, Joachim von Schorlemer currently sees the financial institutions segment as the most promising. "They are using our strong product base in the Fixed Income arena, Equity Derivatives and other specialty products, which will be the main drivers for future growth," he says.

In January, Erhard Schipporeit joined BNP Paribas, as Senior Advisor. Our bank now benefits from his vast professional experience gained in several industries and most recently as he served as CFO of E.ON.

Joachim von Schorlemer is confident all these initiatives, along with new products, will enable CIB’s German operations to achieve revenue growth of 80% to 100% in three years, based on December 2005 levels. “Germany is a market of strategic importance for CIB, and we’re beefing up our teams to be in the top league” he concludes.

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CIB sets its sight on more LBOs

In its drive to capture a greater slice of the LBO market in Germany and to become one of the top five players, CIB has hired a team of ten from HVB.

Headed by Peter Wallner, the Leveraged Finance team has set ambitious objectives, aiming to grow twice as fast as the market and work on four to five LBO deals in 2007, in a private equity market expected to reach a volume of 15 billion euros this year.

"We have tripled the resources within BNP Paribas, so at the very least, we want to see an incremental increase in the number of deals and an exponential increase in business," Peter Wallner explains.

He and his team will bring their expertise in large cap deals, which BNP Paribas had little access to so far. "This business is about knowing the players," he explains. "At HVB, we had been concentrating on bigger customer segments, getting to know key people in key areas over ten years."

The team will be based in a new office in Munich; an important move for CIB, which until now had been operating exclusively out of Frankfurt.

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Sharpening the focus on derivatives

As one of the leaders in equity derivatives, BNP Paribas is keen to leverage that strength in the vibrant German market.

The country's retail derivatives market has been growing exponentially in the last ten years, with a total of 110 billion euros of assets under management.

An equity derivatives team dedicated to the German market has been moved back to Frankfurt from Paris, where it was based for several years.

"Certain cultural aspects have to be taken into account," says Rupertus Rothenhäuser, Head of Retail Listed Products for Germany & Austria. "We realized that when all operations were centralized in Paris, sales teams did miss out on important information flows, meetings and client coverage. Frankfurt really is the center for retail derivatives in Germany."

"We were one of the founders of that business in Germany," he adds. "We used to be a top-three player but lost our focus for a couple of years. We are now back on track, and our target market share for the end of 2007 is around 6%, which would put us at the bottom of the top five."

The move is expected to significantly boost revenues.

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Financing businesses on the move!

One of CIB’s financing businesses is relaunching its organizational structure to keep up with the market challenges and set the framework to fit the Bank’s 2010 Ambition Plan.

Q & A with Dominique Remy, member of CIB’s Executive Committee and Head of Energy Commodities Export Project (ECEP).

ECEP has been a driving force behind CIB’s success. During the last five years, the business line has delivered very strong growth and this has all been achieved in a highly efficient way: with a 60 percent increase in staff to 1,170, revenues have doubled and net profit has shot up four times! How have you achieved these results?

First of all, let me thank all teams and Executive Committee managers for their hard work and congratulate them on their achievements. It’s been a fantastic four-year run! In 2003, we hit the revenue target of 1 billion dollars and we are far above the 1 billion euros today. In the past three years, we’ve been ranked Best Commodity Bank, Best Project Finance house, Best global Trade Finance Provider, Aircraft Finance Innovator of the year and N°1 Export Finance bank. Our operations now span 40 countries with 4 hubs in Paris, New York, Geneva and Singapore. Expertise, know-how and innovation are what has allowed us to get ahead. This covers the areas of oil and gas, mining, soft commodities, utilities, shipping and aircraft financing. We’ve had a particular focus on emerging markets.

As examples, we are number one in Chinese and Brazilian Export Finance, we are number three in Project Finance in North America. We are top three in the US Oil & Gas sector. We are also by far number one in Commodity Trade Finance and number three in Trade Finance worldwide after Citi and DNB NOR Bank.

So why the reorganization and what’s the next step?

Over the time we’ve come to acknowledge that we need to adapt our structure to fit the increase in demand and optimize our offering. Four years ago the department was still nascent and the activity was organized along product lines and regions. I think the place to start has got to be with the clients who use our services:

- Large industrial companies need an integrated service be they in the Gulf Region, in Russia or the US. Our functional organization was split along too many product lines, making it more difficult for the teams to work together and limiting the cross-selling effort.

- The distinction we had in our organization between emerging markets and the industrial world is not really relevant anymore. Look at all the major Brazilian, Chinese and Russian companies. It’s clear that you have to deal with the same types of needs and deals with each one of them and that we have to streamline our units accordingly.

Consequently, I’ve decided to re-inject some focus in our organization: I’m regrouping the main activities in two major business units: Energy and Commodities and Asset Finance. Energy and Commodities will be headed by Lincoln Payton and I’ve appointed Christophe Rousseau to manage Asset Finance. Jacques-Olivier Thomann remains Head of Commodity Finance while Philippe de Gentile Heads E&C Structured Debt. Under my leadership, a new 5-member Executive Committee will manage the whole department.

What about Coverage ? Isn’t it key in ECEP’s reorganization ?

Yes, I have named Jérôme Doucet to lead the effort for coverage as he has very successfully done in the US. Do not forget that ECEP is a specialized coverage group for 2 major sectors : E&C and Transportation which includes Shipping and Aviation.

We simply need to align our client coverage to bulk up our product offer. That involves further optimizing the E&C, shipping and aviation client bases. We will define and follow-up client action plans and establish global budgets per clients. We want to replicate the US organization for Energy and Commodities coverage (E&C) at the ECEP group level.

Last but not least, with the One Bank spirit, people need to break away from their retrenchment and increase the cross-selling effort. It involves cooperation with all the other units of ECEP but also of CIB. We’ll increase each relationship manager’s training on other CIB products and set clear cross-selling objectives per client. We’ll have a single globally distributed platform for all our products. This will improve efficiencies for our clients and CIB will benefit from the cost synergies. Incentive schemes have been set up to reward those who actively take part in cross-selling.

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Financial Deals in The Soup Kitchen

While some traders can be the talk of the town thanks to their charity efforts outside of the trading rooms, Ullrich Schubert, Head of Territory of BNP Paribas Bulgaria, has gone a step further by actually making charity and business go hand in hand. Five years ago he launched the “Soup Kitchen” Project, i.e. a charity food distribution centre, by applying fundamental business principles. “The first step is to identify a need, he explains. In Sofia, the most obvious one is the fight against poverty. Then, it’s all about defending an idea, in this case, the urgency of a hot meal for the elderly during the winter. Finally, you have to market that idea: up until now, the hardest part has been to win over the city of Sofia. Administrative hurdles stalled the project for a year before the Municipality became a partner.”

Once out of the bureaucratic maze, Ullrich Schubert kept his eye on the main objective: figures! In five years, BNP Paribas Bulgaria not only lived up to its challenge by increasing the number of meals served tenfold, but this initiative, perceived as a catalyst for change, won BNP Paribas Bulgaria the first 2006 Investor In Community award given by the Bulgarian Business Leader Forum (BBLF).

This distinction rewards ethically-minded companies and reaps more acclaim every year. However, according to the CEO, Bulgaria is still far behind the ethical trend set by the United Kingdom. “My initiative is worthwhile inasmuch as it stands against the logic of corruption. Five years ago”, he points out, “this idea left more than one person sceptical, but today I can count on 80% of the staff.”

As for financing, the basic principle is that each donated sum will be doubled by the bank. “Soup Kitchen” is our pet project; it has had the unexpected effect of strengthening ties between the Bank and its employees!” enthuses Ulrich who won’t hesitate to act as an impromptu gallery manager selling paintings to hold fund raisings in order to secure the project. How’s that for mixing businesses?

1993 signes

Internet Sites: www.bblf.bg

www.bitc.org.uk (business in the community)

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High altitude deal raises BNP Paribas’ profile in Asia

Corporate Finance Hong Kong raises its rankings with an independent advisory role in Cathay’s landmark acquisition of Dragonair.

On June 8 th, 2006, Cathay Pacific, the Hong Kong based airline, sealed the takeover of Dragonair in a deal with Air China, China’s flag carrier. Coming nearly ten years after Britain’s handover of the Hong Kong Territories to China, the transaction was a watershed for Cathay which had long been vying for access to China’s air space. It had taken more than two years to negotiate the complex deal with Cathay being advised by ABN Amro and Air China by Merrill Lynch. At this stage, BNP Paribas Peregrine was not involved in the deal. But on Friday afternoon, June 16th, 2006, as Jean-Marc Dreyer, then in charge of Corporate Finance M&A in Hong Kong and his colleagues were looking forward to a leisurely fathers’ day week-end, one phone call brought some gravitas.

Merrill Lynch, the advisor to Air China was tendering the role of Independent Financial Advisor to BNP Paribas along with four other banks. Jean-Marc Dreyer recalls: “Within three hours, I called Philippe Meunier Deputy Head of Corporate Finance, Pascal Quiry Managing Director, got the go ahead and put the team together. “We had to assess whether BNP Paribas’ business lines could deliver within the deadline.” “We were able to align the interests of the regional teams and connect the different Corporate Finance functions together, in very short order!” adds Olivier Chauvière Senior Associate, in Hong Kong.“ The challenge was to make sure that we could deliver a draft letter of advice, 15 pages altogether, to HKSE, the market regulator, within 10 days” concludes Isadora Li Managing Director and Deputy Head of Corporate Finance in Asia. “On the day of the shareholders’ circular, our opinion as to the fairness and reasonableness of the transaction must be made public.”

Against the high profile of the companies involved, only leading investment banks were selected to be independent financial advisors. An IFA is appointed to make recommendations to the independent board committee and the shareholders. The mandate is to recommend the terms of the “Connected Transactions” as fair and reasonable, to assess whether the interests of the issuer and the minority shareholders as a whole are preserved and to advise shareholders on how to vote. BNP Paribas Peregrine was approached by Merrill Lynch to take up the role of independent financial advisor to Air China because it was both independent from the parties involved in the transaction, had a strong reputation in the Greater China region and substantial expertise and experience in IFA transactions. “In particular, there are restrictions to how much business you can do with one single client if you want to be a financial advisor.” explains Mignonne Cheng, Head of North & East Asia for the Hong Kong Branch.

“On June 22nd, barely eight days later, we signed our mandate letter and submitted our first draft of the IFA letter to the HKSE. All in all, it had taken us 19 days from the initial meeting and the signing of our mandate letter with Merrill Lynch to the submission of the draft of the IFA letter to HKSE and the sign-off of the letter for despatch to the shareholders of Air China.” adds Kelvin Ho, Senior Manager, who worked with Joyce Lee, Director, Michael Cheung, Vice President, and Jeremy Chan, Analyst, all in Hong Kong to draft the letter that was submitted to the HKSE.

The transaction brought together sector teams, valuation teams and regional teams. It allowed the teams to deliver on group synergies across time zones. In Paris, Hervé Hascoet Managing Director Transports, Stéphane Redon Director Transports and Pascal Quiry brought their technical know-how; they had worked on the takeover of KLM by Air France. Part of the fairness of opinion report involved valuing the various permutations that had been set aside in favor of the deal advised by Merrill Lynch. With only public information on the sale of Dragonair to Cathay to go on, Guillaume Barberousse Vice President, Muriel Atias Senior Associate in Paris and Olivier Chauvière in Hong Kong had to study the different permutations of the structures that had been abandoned and assess whether the deal retained was not detrimental to Air China’s minority shareholders. In particular, attention was dedicated to Air China and to CNAC giving up their 43% stake in Dragonair in exchange for a combined 15 per cent holding in Hong Kong’s leading airline Cathay.

“This transaction not only enhances the profile of BNP Paribas Asia Pacific, but also represents a further integration of BNP Paribas Peregrine into the BNP Paribas Group. It was the first transaction of BNP Paribas Peregrine’s Greater China operation which involved the Business Valuation Team and the Fairness Opinion Committee at Paris Headquarters” points out Pascal Quiry. "Being involved in high-profile deals such as Cathay Pacific creates a positive marketing effect for BNP Paribas’ Corporate Finance arm." concludes Mignonne Cheng. BNP Paribas jumped from the 17th to 11th in the M&A rankings with such transaction on a pro forma basis. “We’ve been cashing in on the feel-good factor, clinching many deals in the wake of our involvement in this high profile transaction which won the award of ‘Best Cross-Border M&A Deal in Asia’.”

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Asia-Pacific update

BNP Paribas is named the ''Rising Star Derivatives House''

BNP Paribas is named the ''Rising Star Derivatives House'' in The Asset Magazine's annual Triple A Derivatives and Structured Products Awards for 2006.

This award is granted to our bank for its creativity in developing its derivatives franchise in Asia. It recognizes the extension of our competitive edge in all areas of the derivatives space - from flow trades and structured products - and across all client segments.

In credit derivatives, BNP Paribas has built a strong integrated credit platform that combine flow trading, exotic trading and structuring across the region. The bank has successfully structured very large self managed CDO and has also developed many structures that allow its investors to express views on the shape of the credit curve of Asian credits. Lastly, the bank was very successful in placing managed deals in the region with specific notes issued for the Asian region: AXIOM a CPPI of long short credit strategies managed by AIG GIG and Palladium a synthetic CDO managed by Blackrock.

In equity derivatives, our bank pioneered in new markets such as China where we have been active in providing Renminbi equity-linked structured products. Chinese institutions, such as Bank of China, chose us as its first counterparty to trade equity-linked structured products.

Successful new product launches include Titanium, a money market structured product first launched in Taiwan, which addressed the need of investors for a short-tenor product with stable and money market-like return. The bank also introduced several products that featured innovative alpha strategies linked to a proprietary S&P index, offering hedge fund like strategies with strong secondary market liquidity.

The Asset magazine is a Hong Kong-based, monthly financial business magazine.

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Dung Quat Refinery Financing Oils The Wheels Of Capital Markets In Vietnam

BNP Paribas breaks new ground as Mandated Lead Arranger and Agent, for the $300m term loan facility to Vietnam’s Ministry of Finance. The deal finances the port facilities of Petrovietnam’s Dung Quat oil refinery.

Vietnam boasts the third largest crude oil production in Asia, but the country lacks the refining capacity to exploit these resources. PetroVietnam’s Dung Quat refinery was first planned in January 1998 and upon completion Vietnam will be able to meet about 40% of its domestic refined oil requirements.

Claudia Belli Jeanteur, Area Manager Export Finance Asia in Paris recalls: “This project was one of the Government’s “priorities” for more than 10 years. Finally, in 2005 the Consortium of Technip, Tecnicas Reunidas (Spain) and JGC (Japan) was awarded the building contract. The financing of this USD 2.5 billion project is finalized step by step. This Nexi Untied loan is one of the major steps”

The deal marks the first time the Nippon Export and Investment Insurance (“NEXI”), Japan’s export credit agency covers the political and commercial risks for the loans extended by Japanese financial institutions to the Vietnamese Ministry of Finance by providing the Overseas Untied Loan Insurance (the “OULI”). Hirotsugu TSUDA, Area Manager Export Finance Asia works in Paris and explains: “In the market it was claimed that there were no chances to achieve a NEXI untied loan and it was expected to be even more of a challenge for BNPP! Now, we’ve opened the door for more NEXI OULI transactions with Vietnam.”

Without Hideo Takeuchi, Senior Marketing Officer of Export Finance in Tokyo, the deal would not have taken place. He leveraged his long-standing relationship with NEXI to secure the mandate: “CIB’s financing skills are widely praised in Japan; we rate first among foreign banks and are considered as a local bank in the market place. We won the deal on economic grounds. In the last stage of the price negotiation, our NEXI untied proposal was a one-on-one battle with Depfa Bank’s commercial loan proposal. Ultimately our Nexi proposal proved more competitive.”

Mizuki Sato, Export Finance Tokyo adds: “BNP Paribas is truly a global Bank, it is not unusal for us to arrange Korean financing for Indian clients or a Chinese Sinosure financing for Vietnamese borrowers or in this case Japanese covered loans to Vietnam!”

In Hanoi, Le Phan Hoai Nam, Head of ECEP in Vietnam had established a mutual trust relationship with Vietnam’s Ministry of Finance thanks to dozens of well managed deals where the MoF was acting as Guarantor. He comments: “The project was highly visible in Vietnam given its size and importance to the country’s energy security and everybody was vying for it. “CIB stuck with it throughout the very complex and eventful history behind the project and won the mandate! The goodwill we built with PetroVietnam over the years was key to snapping the NEXI deal. Their cooperation allowed us to deliver all the due diligence documents required by NEXI on time.” TRUONG Thanh Long, from Hanoi ECEP team recalls: “The turning point arrived in March 2006 when we learned from the MoF that the Government had assigned the MoF to borrow USD one billion (out of the total USD 2.5 billion investment cost) for the project. We obtained the mandate on June 23rd 2006.”

Takeuchi-San goes on: “Negotiations with NEXI started in August and everything was ready for a signing as early as December 22nd; that includes a two months setback before the signing as NEXI had to fulfil its environmental regulation requirements.”

Claudia Belli Jeanteur continues “The proceedings moved along swiftly thanks to the strong dedication of the Hanoi team in its relation with the MoF and Petrovietnam; the Tokyo team worked with NEXI and in Paris, the team coordinated the proceedings and reviewed the documents. In Tokyo Mizuki handled all the aspects of the documentation and of the authorization with NEXI. TAKEUCHI-san kept a daily contact with NEXI, overcoming their doubts and their questions, Long in Vietnam maintained a constant presence with Petrovietnam staff, translated all the documents, and accompanied the delegations to the sites together with Hideo. Nam was available day and night, being called at any time by the Ministry of Finance, by NEXI, by Petrovietnam, Tokyo and us!”

The deal was scheduled to be signed on December 22nd, 2006, which had been selected as a “lucky day” by Petrovietnam and the Ministry of Finance! Everybody was about to fly in, only to find out that the MoF was still missing one authorization… the Prime Minister’s! With just three days notice, everything was postponed! The signing ceremony finally took place on January 30th 2007, and was chaired by the President of Petrovietnam, the Vice-Minister of Finance and NEXI’s Vice-Chairman.

In Hanoi, Le Phan Hoai Nam concludes: “This groundbreaking transaction has opened access for Vietnam to more competitive financing sources in the international capital markets and we can build on the very good relationship with Ministry of Finance to get CIB more business. The Vietnamese government is already talking about the construction of a second and third refinery.”

”The synergies with other businesses will arise in the second stage of the deal, probably with Fixed Income for the swap needs of the facility, and we’re hoping for a large cross selling opportunity coming from the future bond issuance of the MoF.”

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Implementing Basel II in Asia

A Hong Kong workshop on Basel II implementation in Asia showcases how BNP Paribas’ leading-edge in credit derivatives can reduce regulatory capital or apply existing capital in a more efficient manner.

The Revised International Capital Framework, also known as the Basel II accord on banking regulation was struck almost three years ago. The increased regulatory pressure aims to make the international banking system more stable by forcing banks to improve their ability to identify, measure, price and disclose risk in their lending books. It governs how much capital banks must set aside to cushion themselves from various problems.

European banks began implementing the new rules in January, but the US has delayed it until 2009. Beijing has just set a deadline for Basel II, and big Chinese banks with large overseas operations will have to comply with the new standard by 2010.

BNP Paribas was chosen to present a workshop during the GARP conference (Global Association of Risk Professionals). In Asia local banks can benefit from CIB’s far-reaching expertise and rival with the growing international competition as they learn to use more targeted internal risk management models that could allow them to hold less regulatory capital. This, in turn could lead to higher returns on equity and rising share prices.

“Banking clients are faced with the challenge of implementing Basel II, and it is evident that many do not entirely understand the new regulatory guidelines and how they should be implemented,” says Eric Nicolas, Head of Fixed Income, Asia Pacific. “Nor do they fully understand the need to better define and allocate economic capital and how it can be used in managing credit portfolios, or the levels of regulatory capital they will be required to hold under the new capital accord introduced by Basel II,” says Eric Nicolas.

“They must therefore look at credit risk and how it is allocated. They must look at market risk in terms of how it is a variable risk. Most importantly, they must grapple with the concept of operational risk. These three factors are the basic fundamentals of Basel II.”

“Banking watchdogs, who are free to implement the Basel II guidelines at their own pace, have adopted different implementation schedules, since there was no obligation on the regulators to stick to a predetermined schedule. ” points out Eric Nicolas. “As a result, in Asia, different regulators will adopt different timetables. For instance in Hong Kong and Singapore, the new accord was phased-in beginning January 1st this year. But the Philippines will witness a significant impact because of the extensive sovereign exposure in the local banks’ portfolios – all of which will have different capital weighting calculations after the adoption of Basel II. Their implementation will take place in three phases starting mid 2007.”

“BNP Paribas itself prepared in advance of competitors to manage its own capital according to Basel II,” he says. “Asia has participated in several discussions with regional regulators in order to understand their intentions in terms of timing.”

“To assist our customers, we presented several papers at the workshop on topics such as securitization, bond issuance, and the issue of derivatives to manage capital effectively under the new Basel II regime. The global head of portfolio management also made a presentation.”

“Since many Asian banks are cash-rich,” says Eric Nicolas, “the need for effective liability and asset management in order to optimize capital and shareholder return is particularly important. This is where CIB’s expertise comes into play. What is important for BNP Paribas is that it gives us the opportunity to invite clients to attend the workshops. Some 40 clients from Indonesia, Hong Kong, Korea, Thailand, The People’s Republic of China, Singapore and Australia, as well as guests from within GARP attended the conference.“

One of the major discussions centered around the widespread absence of external ratings on loans made by banks to Asian corporate customers. Basel II will throw a sharper focus on risk measurement and capital allocation. This will have a significant impact on the way economic capital is managed. “This is where the techniques of managing assets perfected by BNP Paribas will come into play,” says Eric Nicolas.

“In the case where external ratings on credits are not available,” he explains, “it would be necessary for banks and financial institutions to first establish a system of internal ratings and then test these to see how the internally-generated credits correlate with other loans in their portfolios. At this point, the benefits of securitization may come into play if financial institutions wish to remove some loans from their balance sheets.”

“The internal ratings must then be tested to the satisfaction of home regulators who must validate the models to satisfy themselves they are compliant with the Basel ‘Internal Ratings Based’ (IRB) guidelines. The shortcoming of historical data in Asia presents a challenge. Most of the large banks are now using internal ratings which have been validated by regulators, while for the remainder, the risk measurement models still need to be validated.”

“BNP Paribas knows what the Basel II implementation schedules are, and what methods may be adopted to fall into line with the new provisions when they become applicable. Using capital optimization techniques we can reduce our client’s regulatory and economic capital and use it appropriately.”

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BNP Paribas helps Baldor electric company gain traction for the future

An 87-year-old motor and generator manufacturing business located in Fort Smith, Arkansas, and a European Bank might seem like an odd couple. But when BNP Paribas worked on a simultaneous high-yield bond offering and loan syndication in January, to finance Baldor’s acquisition of the Power Systems business of Rockwell Automation, the Bank proved that with the right relationships, the right product ideas and an impressive amount of homework, it could outbid and outsmart its US competitors.

Not only did the bank work as left bookrunner and lead on a $550 million high-yield bond and a $1.2 billion credit facility, it was sole underwriter of the whole $2.1 billion acquisition finance package and transaction co-ordinator for three concurrent acquisition finance offerings, including a share offering run by another bank.

“All the stars were in alignment. We identified their needs very rapidly, then the product platforms worked extremely well together and we were able to quickly respond,” says Jean-Yves Fillion, Head of Structured Finance and Corporate Coverage for the Americas. “Over 20 people in the Bank were involved at some point,” he says. “In every way this was a team effort.”

BNP Paribas’ relationship with Baldor began in 2004, when it did a term loan for the company, which could have been problematic as Baldor didn’t have a credit rating or any institutional debt investors.

"Our interest rate derivatives group was very innovative and created a structured fixed rate loan that saved Baldor a significant amount of money." says Shayn March, Relationship Manager for the general industrial sector and for Baldor.

BNP Paribas had also been involved in a one-off lease financing for the company, but the acquisition finance and structuring team, headed by Andy Shapiro, also made a big effort to stay in touch with management. In fact, some people from Baldor came along to a three-day client skiing event hosted by BNP Paribas in Deer Valley, Utah, in February 2006.

“This event afforded us another opportunity to bond with the treasury team. ” says Fillion, “ The investment banking world has become so "commoditized" that personal trust and relationships are key differentiating factors. Access to decision makers, early identification of transaction opportunities along with a coordinated product delivery are a wining formula. Our challenge is to do it more systematically.”

When Shayn March and Duane Helkowski, Head of Homebuilding and Regional Head of General Industrials, inherited the Baldor account in June 2006 and talked with the Acquisition Finance Group, they realized the importance of visiting the company in Arkansas as soon as possible. As it turned out, they were in the right place at the right time. Baldor soon called March and Helkowski to tell them of their interested in the Power Systems acquisition and they, Fillion, Konstantin Driker, a director in high yield capital markets, and Renaud-Franck Falce, a director in Acquisition Finance, flew to see the company in Arkansas again, this time with a concrete proposal on how to structure and finance the acquisition.

BNP Paribas had the most aggressive and cost effective proposal and won the mandate. “By taking full advantage of the favorable credit markets at that time and given our ability to place risk with investors, we were able to provide debt capacity over and above what the company needed, which made a very favorable impression,” says John Ong, Global Head of High Yield. “We told Baldor that if they wanted to, they could buy this company without raising any additional equity.”

But a commitment letter from the credit committee of BNP Paribas, delivered that same day, saying that the Bank would solely underwrite funding for the entire acquisition, was the trump card. “It was hard to beat that,” says Driker. The BNP Paribas team were called in to explain the rationale behind their debt financing assumptions at a Baldor board meeting, also attended by the M&A advisors. “In response to our very aggressive proposal, our competitors basically said that we were wrong, the pricing was too tight, the market wouldn’t take it and the rating assumptions were too optimistic,” says Ong.

Then came the launch of an 11 day road show for the debt and equity offerings, also coordinated by BNP Paribas, where the company’s management met with investors in one-on-one meetings and group presentations in New York, Boston, Chicago, Los Angeles, Minneapolis, Milwaukee, Philadelphia and San Francisco.

The fact that Baldor put its faith in BNP Paribas turned out to be the right decision. Given the great liquidity in bank and bond markets in January, the loan price was flexed down several times, the bond priced well within price talk and the corporate and senior note ratings came in above predictions, with the senior notes rated B3 by Moody’s and B by Standard & Poor’s and the corporate rating set at B1 by Moody’s and BB- by Standard & Poor’s.

Books on the 10-year $550 million high-yield bond closed on January 24, with over $4 billion of orders, and the offering priced on January 25, in the middle of price guidance, to yield 8.625%. The $1.2 billion senior credit facility, consisting of a five-year revolving credit facility, where the price will vary according to the leverage of the company, and a seven-year $1 billion term loan, priced at Libor + 175 basis points.

Just a few weeks on, the success of the deal had already had an impact and the efforts of the whole team had already led to some repeat business from the company. “Baldor’s management was overwhelmingly pleased with our execution on both the bond and bank transaction. It’s partly because of the trust we established from to our strong execution that the company gave BNPP complete control over the syndication of $350MM in interest rate hedging we executed for the company that week,” says March.

Perhaps even more importantly, the deal has generated a lot of interest from other potential clients. “Baldor has got such tremendous visibility, that not only has corporate coverage been using it to win new business, other coverage units of the Bank have been talking to their clients about it as well,” explains Fillion. “It shows that BNP Paribas can be a very efficient left bookrunner for loans and bonds and for acquisition transactions over $2 billion. That provides tremendous traction for future business.”

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Equities and Derivatives in the Americas – A Great Growth Story

The Equities and Derivatives group in the Americas continues to flourish.

Todd Steinberg’s Equities and Derivatives team is developing a one-stop shop to establish itself as a leader in its field.

Last year was a tremendous success, as the group hired more than 50 front office professionals, increased revenues by over 120 percent on 2005, and achieved critical milestones in each of the five areas of the platform. The year ended on an upbeat note when the global EQD group was named “Equity Derivatives House of the Year” by Risk magazine.

Steinberg joined the bank in the fall 2005 after an impressive career during which he founded and built the equity derivatives business at Wachovia Securities and ran equity derivatives businesses at some of Wall Street’s largest banks. Commenting on the recent success of his group, Steinberg said: “BNP Paribas’ success in the US can be attributed to the teams’ ability to combine our European technical expertise with a local Americas client and markets perspective. We recognize the importance of adapting the approach EQD has perfected in Europe to the Americas to create a unique business model.”

Many areas of the platform including strategic equity, fund derivatives, structured products and the flow teams have outperformed their competitors in a number of ways. The fund derivatives group remains a leader in new product development and the strategic equity group under Janet Kim continues to innovate. In 2006, EQD was recognized for this strength and was awarded “Innovation of The Year” for the share repurchase transaction they structured for Hewlett Packard. Additionally, the complex flow sales team led by Aaron Ford had a record-breaking year. In partnership with Stephane Petermann and Philippe Bernard on the trading team, the group was recognized in the Greenwich survey as number 1 in the US for flow sales and number 2 for flow trading. “We have an extremely talented team of professionals across our platform that work together and share knowledge and expertise. This is in evidence on a daily basis in our product innovation, development and customer focus,” said Steinberg.

As the bank continues to extend its hedge fund business in the US, another area of expansion was the addition of a full-fledged equity finance customer business and the appointment of Richard Sansaricq as Head of equity finance sales. Richard had previously been a director in the global hedge funds sales department at Abbey National. Steinberg characterizes these hires as one of the last steps in the establishment of a full-service equity derivatives business in the US.

Other areas that have been a keen focus are options and exchange-traded funds. The bank hired well-known Wall Street heavy hitters including Greg Hurley as Head of the listed derivatives single stock trading team from Merrill Lynch, John Bishop as Head of listed index/ETF trading from Wachovia and Joe Waskas as Head of ETF and listed options sales, to spearhead this build-out at BNP Paribas.

Asked where the EQD Americas group goes from here, Steinberg’s answer is compelling. ”I joined BNP Paribas to help leverage a fantastic global equity derivatives business to become a leader in the Americas market. As a team, we have made great progress towards that goal in 2006 but we have more room for growth. With BNPP’s heritage of excellence in equity derivatives, global resources and capability, financial strength and senior management support, we are confident we will be recognized as one of the top EQD houses in the Americas,” he said.

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Crossing the Hudson: BNP Paribas’ Functions move to Jersey City Headquarters

BNP Paribas signs off on a 15-year lease for new office space in Jersey City, to match forecast business growth.

"One day, a great city will rise on the west bank of the Hudson River". BNP Paribas is doing its part to ensure Alexander Hamilton[1]’s prediction becomes a reality. The Bank has unveiled plans to relocate its support functions to new Jersey City headquarters. Planning for the move is in full swing, with regular site visits and town hall meetings for staff to see their new working environment and voice their concerns.

The Bank has signed a 15-year lease for 110,000 square feet with Brookfield Properties. The new office space is located in the Newport Tower which was built in 1991. Larry Sobin, Chief Operating Officer, Michel Magny, Head of Human Resources and Sue Bacon, Head of Premises and Logistics are coordinating the move, which was born out of a need to cater for a forecast headcount increase in the New York area to 3000 by 2012, up from 2400.

The bank initially carried out an extensive search of possible sites in Brooklyn, Queens, Long Island City and Jersey City. Jersey City was chosen in some part due to its 15-year history of evolving as the 3rd financial centre in New York after midtown Manhattan and the downtown financial district.

Sobin says: "We wanted a class A building that gave us a large footprint, one that was near multiple sources of transport, light rail, ferries and other amenities. We have also looked at subsidies that employees who make the move will receive. There is even an onsite cafeteria, a plus for Manhattan based staff used to braving the lunchtime rush in the local delicatessens."

Sue Bacon commented that the new building represents a definite improvement on 919 and is on par with 787. She said Jersey City had an extra aura of quality. She added: "This is a building that is open and bright; I think staff will find it very enjoyable."

Michel Magny says that management will try to be as sensitive as possible to any concerns that staff have about travel and increased commuting times. "We want to be very transparent throughout the whole process of the move and treat all of our staff as fairly as possible."

Sobin says that initial concerns among staff, that are normal when any big change is introduced in the workplace, have now been replaced with optimism.

"What we have found is that the more they know, the less unsure they are. The rationale for the move is becoming better understood. Many are already highly enthusiastic about it." Many members of the management team will relocate with other staff to New Jersey, including the chief financial officer and chief operating officer. Other banks such as JP Morgan and Société Générale have already established a presence in Jersey City. The economical reason for moving to Jersey City is ‘a no-brainer’ says Magny. "Having office space in Jersey City is very cost effective but finding such a good space surrounded by great transportation and amenities is a dream."

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Executive Portrait "A willingness to listen and recognition of the importance of human values"

Today a regional manager in Italy, Nicola d'Anselmo grew up on the Adriatic coast. This very "maritime" childhood has left him with a keen sense of curiosity and a gift for adaptability thanks to which he has gone on to supervise a number of extremely different businesses within the bank.

Situated in Milan's historical centre, and blending in perfectly with the 16th century monuments located around it on the Piazza San Fedele, the modern offices of BNP Paribas offer a marvellous example of Italian design talent combining tradition with modernity. This elegance is matched by Nicola d'Anselmo, the young regional manager sporting a striped shirt, a classic tie and a number of accessories which betray hints of his personality including cufflinks featuring the bank's house colours and a vintage watch. "I love watches", he explains, "not only for their mechanism but also for their ability to capture the mood of a particular period. This one dates from the 1970s, a period in Italian history of particular interest to me".

Nicola d'Anselmo is happy to grant us all the time we require for the interview: "How long do you need?" he asks. His relaxed and relaxing style immediately makes you feel at home, just like one of the team. "I always try my best to ensure that my relations with others are as easy-going as possible. I enjoy working with people who are very direct, who come straight to the point, and I like to go to where the action is, darting from one office to another". This has doubtless become a necessity, following a very busy year during which his June 2006 appointment as Head of its Milan Branch, occurred just after the spring acquisition of BNL. "BNP Paribas has made a huge investment in my country", he explains. "Italy has become its second-largest market with 4 billion euros of income. This motivates me both as an Italian and as a banking industry professional ".

Today, he finds himself at the meeting point of two career paths which are very familiar to him: in 1995 he joined Leveraged Finance and in 1998 he became head of the Italian team which quickly emerged as the leader in the Italian peninsula. The year 2006 brought a new challenge for the man who readily admits that he is "a bit of a workaholic" and who manages teams of more than 450 people spread between Rome and Milan. He is keen to talk about his team throughout the interview: "In Italy, CIB's role is naturally to serve its own clients but at the same time to supply products and services for other parts of the group. It is therefore very important to be at ease when working with colleagues who often come from very different backgrounds".

When asked what he felt had marked him the most during his career, he told us "extremely valuable and precious colleagues, who, since my earliest days in the industry, have instilled in me their passion for this work. A number of them are still with Leveraged Finance today, and I feel that this forms an excellent link with the past. Human qualities are vital in business if you want to succeed". It's easy to imagine him framing photos of his team members and laying them out on his desk as if these were his family. In much the same way, he is also picking up French naturally by conversing with two French-speaking colleagues.

The advantages of speaking French are obvious to Nicolas, whose face lights up when the conversation turns to Termoli, a small town on the Adriatic coast where he lived up until the age of 18. He then moved to Venice to study economics at Ca'Foscari University. Without falling into any of the usual clichés which crop up when people usually mention the lagoon city, Nicolas instead talks to us about his relationship with the sea, which he describes as "an open and living landscape, always ready for change, and which has no doubt had a great influence on my character".

From time to time, Nicola d'Anselmo consults his e-mails apologetically, far from the stereotypical image of the young financial shark, despite the fact that the Financial News named him the finance world’s “Rising Star” of 2006. One of the selection criteria was to be aged under 40: "It has become something of a cliché to associate certain qualities with certain ages, and it is certainly true that under the age of 40 you can find a mixture of maturity, energy and flexibility". As he sees it, an ability to listen is the main quality needed in his job: "I supervise transactions in a number of highly specialised fields, and I quickly need to be able to understand how things work if I'm to add extra value and to be able to make decisions effectively". He also rates a capacity to get to the nitty-gritty and personal determination as key qualities, "not forgetting physical fitness, which is extremely important!"

To keep in shape, he plays football once a week, with the relaxed attitude of a man who today has nothing to prove: "I do everything I can to make sure that my team scores, and now and again I attempt the odd goal myself".