Rail firms tap no-fee advisers | SCMP

A much-coveted advisory role to the government on its plan to merge the Kowloon Canton Railway Corp with the MTR Corp has been awarded to Citigroup and HSBC - after they offered their services free.

......banks' offer to provide financial advisory work at no cost for a complicated deal that could easily drag on for more than a year. However, this sudden bout of altruism may stand the two banks in good stead on the league tables, and help them win future deals from the government.......

The two banks displaced NM Rothschild & Sons, believed to be the front-runner to win the government's mandate given that it helped create the merger plan and has long been the government's financial adviser for the MTRC.......

Banking sources said Rothschild - which has done much of the advisory work for the government did not lose the mandate because of its pitch, but because its competitors were offering to do the work free.......

Bankers have often lamented the government's deal process, complaining it is interested only in comparing fees, and not bankers' execution and advisory capabilities.

"It's very tough to work for the government. They invite banks to submit proposals, but often their decisions are not based on the merits of the proposals but only the prices. That gives us no incentive to bid for their deals," a banking source said.

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