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Carl Icahn's High River Limited Partnership has offered to buy all of XO Communications' outstanding senior secured bank debt at a price of 50, according to a memo obtained by LMW. The new offer is at a price 20 cents lower than Icahn's last offer, but Icahn is now offering to buy all of the bank debt instead of just one-third of it, which is what he had been after. As first reported last week on LMW's Web site, the deadline for the new offer is 5 p.m. tomorrow. Icahn could not be reached by press time.

Lenders are increasingly using credit default swaps to gain exposure to investment-grade loans, forgoing traditional participation in the primary market. Selling protection essentially gives the seller the same credit risk as direct participation in the loan, but the premium on the protection far outweighs the skinny pricing on investment-grade loans. Banks hurt by recent events in the investment-grade market are now looking at the same risk with better return, and LIBOR plus 12.5 basis points just doesn't add up.

While one friendly source was not able to furnish an LMW staffer with many story ideas, he was able to offer up a great tip. "Grab your golf clubs because nothing is happening," he said of the last week of August.

This chart, provided by Citibank/Salomon Smith Barney Inc., tracks bid-ask prices for par credit facilities that trade in the secondary market. It also tracks facility amounts, ratings, pricing and maturities.

Prices for credit protection on Malaysia have fallen and volumes rocketed after Standard & Poor's upgraded the sovereign. Malaysian credit protection traded five to six times around the announcement on Tuesday, in comparison to a typical week where Malaysia trades about once a day. "Quite a number of trades went through," added a trader at Salomon Smith Barney.

BNP Paribas and Barclays Capital say the medium-term swap rate is overvalued and recommend investors take long and short exposure to take advantage. BNP is pitching a butterfly trade, which is where an investor would either purchase or sell swaptions in the middle portion of the curve and then do the opposite in the outer ends, or wings, of the curve. Barclays is also recommending a butterfly trade, specifically one executed with a straddle structure.

Credit-default protection on telecom companies tightened on Tuesday, grinding in even further Wednesday morning. The moves were sparked by the credits' improving equity performance and investors showed comfort that companies have begun to take needed write-downs from investments in third-generation licenses, said traders in London. In addition, Deutsche Telekom announced it was on track to report higher full-year earnings compared with last year, which tightened the price of its five-year protection to 270 basis points/280bps on Wednesday morning from 295bps/300bps on Monday, according to traders.

Valuation Inputs

A group of senior Bank of America equity derivatives executives that defected earlier this year are putting the final touches on their first hedge fund, Laurel Ridge Partners (DW, 2/26). The team, led by cio Van Nguyen, former business manager of the equity derivatives trading group at BofA in New York, is planning to launch the fund this quarter, as well as its offshore entity Laurel Ridge International, with USD200 million in committed capital from outside investors. Nguyen declined to name the investors but added that the firm is looking to cap the pair of funds at USD250 million.

Barclays Capital has hired Andrew Whittle, senior managing director of credit derivatives at Bear Stearns in London, as its European head of credit derivatives. This is a new role, said a spokesman, noting that previously the European credit derivatives team had reported directly to Vince Balducci, global head of risk finance in New York.

Bear Stearns is recommending clients buy dollar calls against the Singapore dollar in the short term and UBS Warburg and Commerzbank also expect a fall in the Sing dollar. James Fauset, v.p. in foreign exchange at Bear Stearns in London, said the bank has been recommending two-month U.S. dollar calls with a strike at SGD176.5, when spot was at SGD174.50 Wednesday. He said the firm has been advising hedge fund clients to put on such trades. As the global economy slows, he expects Singapore dollars to weaken more than other Asian currencies because of its dependence on exporting globally. Fauset added that volatility in the currency is usually low, around 6.3%, so the premium is only 0.50%.