Raising Capital And A Few Glasses

It's no fun being the junior member of a Salomon Brothers Inc. team vying to clinch a deal over dinner in Prague. That person becomes "designated drinker" for the inevitable rounds of toasting. When one such banker couldn't sneak enough mineral water into his glass while entertaining the managers of a Slovakian chemical company, he won Solly the right to lead the privatization only after painfully slogging through his presentation the next morning.

Investment banking in the Czech Republic capital still teeters a bit on the wild side. Two nascent bourses battle for business, with many investors ignoring both by swapping shares privately. Even basic company information is often shrouded as privileged. But the privatization of 1,500 companies last year, and of an additional 770 starting this month, has had global dealmakers jostling for business. "The market is small but very competitive," says Alex Seippel, head of the Prague office for Bankers Trust Co. "It's an exciting time to be here."

The Czech Republic's shift to private enterprise made Prague a magnet. It distributed vouchers to citizens that could be transferred to shares in the companies, which then turned to investment bankers for advice on capitalist management. As the second wave of privatization begins, bankers are salivating over the telecommunications monopoly.

U.S. firms seemed poised to get the edge on deals. Local commercial banks are active, but CS First Boston Inc. Executive Director Charles Harman says: "They have no expertise in big M&A deals, big privatizations. They need Western technical expertise." And business in Prague is shifting from an advisory role to the type of work in which the Americans often elbow out their European and Japanese peers--raising capital on international markets for newly privatized companies. William Browder, London-based co-head for Central and Eastern Europe at Salomon Brothers, says that Czech companies are already exploring international equity offerings.

In domestic debt offerings, as well as equity sales and trading, CS First Boston leads the pack. As the only foreign house with a Prague Stock Exchange seat, it handled over half of the $25 million volume on a recent Tuesday, the only trading day in the week. The firm managed the first Czech fixed- and floating-rate debt offerings for glassmaker Glav-

union, among others. And it is preparing to launch the first foreign-managed investment fund in Prague. "There's been an explosion of activity," says Andrew Reicher, who runs the 17-person Prague office with Czech-born American Zdenek Bakala.

Bankers Trust also has a good field position. Alex Seippel has a dozen privatizations to his credit. The bank advised the Czech bank that issued the country's largest corporate public bond issue for CEZ, the monopoly power company. The offering was worth 2.1 billion koruna ($72.2 million). Some Bankers officials snared the deal partly by singing Beatles songs in a karaoke bar until the wee hours.

The flood of privatizations is expected to end next year. But there will be plenty more work to go around. Time to stock up on the mineral water.