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Duke Street Capital Debt Management is planning to launch its second collateralized debt obligation, which will be backed by leveraged loans. Ian Hazelton, London-based chief executive, says the new deal, dubbed Duchess II, should close within the next six weeks. This deal will be slightly smaller than the E1 billion debut deal Duchess I, which closed in June 2001.

Duke Street Capital Debt Management is planning to launch its second collateralized debt obligation, which will be backed by leveraged loans. Ian Hazelton, London-based chief executive, says the new deal, dubbed Duchess II, should close within the next six weeks. This deal will be slightly smaller than the E1 billion debut deal Duchess I, which closed in June 2001.

Several new issuers are expected to tap the high-yield homebuilding sector on the back of improving credit quality, according to two analysts who follow the sector. The whole sector is set to be moved up a notch by the rating agencies, says Rob Manowitz, analyst at UBS Warburg and a first-teamer on the 2002 Institutional Investor All-America Fixed-Income Team. Upgrades to existing issuers will open up the lower rungs of the ratings ladder to smaller regional players that may view the high-yield market as an opportunity to secure long-term fixed capital, Manowitz says. "There are probably something like a half dozen issuers out there that fit the characteristics the high-yield market is looking for," he argues. He declined to volunteer company names that fit this description.

Callidus Capital Management has chosen Wachovia Securities to be the underwriter for its debut loan deal, the $300 million Callidus Debt Partners CLO Fund II, after being won over by Wachovia's proprietary credit-swap feature. "Wachovia is acting as underwriter, because the APEX structure was a very attractive concept. We looked at half a dozen structures, and this was the one which best fit with our theme of capital preservation, while also enabling the deal to avoid an expensive BB tranche," explained Richard Ivers, a founder and managing director of Callidus. He declined to name the other banks considered. The expense of the BB tranche reduces the overall return to equity investors in CDO deals.

Katonah Capital Management became the first manager to issue notes on a collateralized loan obligation this year by raising debt for the approximately $350 million Katonah CLO IV. One analyst said the $265 million of Triple-A notes priced at LIBOR plus 55 basis points, which is tighter than the recent CLO arbitrage pricing of LIBOR plus 60. But, Katonah reportedly priced the Triple-As with a discount margin in the realm of LIBOR plus 60-65. The BBBs traded at LIBOR plus 290 and priced at par. Officials at Katonah and lead underwriter Credit Suisse First Boston, could not be reached by press time. Katonah IV has a weighted average rating of B1/B2 and references a pool of 85% loans and 15% bonds.

Lehman Brothers last week lost a brace of mortgage-backed security professionals to two Wall Street rivals. Peeyush Misra, senior v.p.-collateralized mortgage obligation structurer and trader, left Lehman early last week to join Bear Stearns, where he will take a new position heading new issue structuring and trading. He declined to comment when reached at his desk.

The market was buzzing last week over a plan for Allied Waste Industries that would likely refinance bank debt. In anticipation of the potential move, the company's "B" and "C" tranches have firmed, trading up as high as 99 2/3 to par from 99-99 1/2 earlier this year. Market players are anticipating that a plan in the making could possibly include a $1.5 billion term loan, a new revolver, as well as bond and equity pieces.

Amid its battle for control of WorldCom, MatlinPatterson Asset Management has begun raising capital for a new distressed debt fund--with a target north of $2 billion. The firm has retained the private equity capital-raising firmAtlantic Pacific Capital to raise more than $2.2 billion, said an industry official familiar with the situation. First closing is expected in June, he added.

Maureen D'Alleva has left Morgan Stanley, where she was a v.p. and high-yield analyst covering a variety of sectors including chemicals, paper and forest products and metals and mining, to join New York based hedge fund Angelo, Gordon & Co., as an analyst in the firm's collateralized loan obligation group, according to an analyst with knowledge of the move.

Maureen D'Alleva has left Morgan Stanley, where she was v.p. and high-yield analyst covering a variety of sectors including chemicals, paper and forest products and metals and mining, to join New York-based hedge fund Angelo, Gordon & Co., as an analyst in the firm's collateralized loan obligation group, according to an analyst with knowledge of the move.

Audax Group, a Boston-based alternative asset management firm, is planning to provide senior debt lending for middle-market companies in an effort to fill the gap left by the wave of bank mergers in the last few years. "Sponsors are searching for additional sources of senior debt, primarily due to consolidation among banks providing capital to the middle-market," said Kevin Magid, who heads Audax Group's debt capital markets business and was previously a managing director in the leveraged finance group of CIBC World Markets. "We have a $440 million mezzanine fund and we look forward to adding a senior debt capability."

Aurora Foods bank debt has been stronger this week, with market players quoting the term loan in the 90-91 context up from the high 80s. Reports indicate that the company is getting close to selling off some of its frozen foods businesses. Calls to financial officials at the company were referred to a spokesman, who confirmed that the divestitures are scheduled for the early part of this year but declined to elaborate. Aurora hired J.P. Morgan and Merrill Lynch last summer to aid its divestitures.