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The Texas Permanent School Fund is looking to shift some $170 million out of collateralized mortgage obligations and commercial mortgage-backed securities and into corporates and callable agency debentures. Carlos Veintemillas, portfolio manager of $8.5 billion in taxable fixed-income, says CMOs and CMBS have had a great run, but he believes the economy will improve by year-end, which should cause corporates to outperform CMOs and CMBS. He also argues that corporates will get a boost if dividend taxes are eliminated, because it will encourage companies to look more favorably on issuing equity and cut back on debt issuance. As for callable agencies, Veintemillas says they offer more yield than bulleted agencies, and tend to outperform bullets as interest rates rise. Veintemillas says he will make the trades as the securities he is looking for become available.

London-based F&C Management will be an ongoing buyer of higher rated asset-backed securities and is looking at opportunities in the financial sector. Peter Harvey, head of U.K. credit who oversees £25 million in sterling corporate bonds, says he likes ABS because the asset class offers a good premium in comparison to other corporate bonds. In particular, he likes hospital securitizations, for example last year's BUPA transaction and utility deals such as those from Anglian Water and Glas Cymru. He declined to say which upcoming transactions he may be buying, but any bonds he buys will be in the 10-year and over part of the curve.

The market for WorldCom's bank debt slipped a few points falling from the 25-26 range into the 23 context last week. Traders said paper for the bankrupt telecom company fell after AT&T posted weakening revenues for both its fourth quarter and year-end results. Rumors were floating of a seller with $200 million of WorldCom bank debt, but no trades could be confirmed. "Banks are sellers at the 26 level," commented one trader. AT&T reported an 8.6% decline in revenue for its fourth quarter compared to the same period last year. Full year revenue was also down with a decline of 10.4 % from the previous year. Other market players suggested the name fell on reports that David Matlin of MatlinPatterson Global Opportunities Fund is confronting hurdles in his effort to gain control of WorldCom's bankruptcy process. WorldCom's recently appointed acting cfo, Victoria Harker, could not be reached by press time.

Workflow Management has secured a new $180 million credit with softer covenants and relatively lower rates in order to remain in compliance with its credit agreement during a downturn in the printing industry. The new line replaces a $180 million revolver on which Workflow had breached EBITDA-based covenants last April, said Michael Schmickle, executive v.p., cfo and secretary. He explained that the previous cap on leverage was 3.75 times, while Workflow's multiples are presently more than four times. The company obtained waivers on the covenants, but pricing climbed to LIBOR plus 12% levels with the covenant breach. The new agreement provides more relaxed covenants, including a senior debt leverage provision shifting from 4.9 times down to 3.9 times by the end of 2003.

Royal Bank of Scotland closed syndication of its $116 million financing package for MW Manufacturers and filled the institutional piece for its PlayPower acquisition credit with co-lead UBS Warburg. The MW deal, which was twice oversubscribed, backs private investment firm Investcorp's $188 million acquisition of the door and window product maker from Fenway Partners, according to a banker familiar with the situation. The credit includes a five-year, $20 million revolver; a $66 million, six-year term loan priced at LIBOR plus 41/ 2% and a $30 million mezzanine piece that matures beyond six years. RBS is sole lead and underwriter of the credit, the banker stated, adding that seven investors signed onto the deal. MW's senior leverage levels are at 2.25 times, while its total leverage is at 3.25 times, he added. An RBS official declined to comment, while officials from MW and Fenway did not return calls by press time.

Royal Bank of Scotland is seeking to hire up to five new bankers for its London-based securitization business and is aiming this year to originate more deals in Europe. The new hires will be made to fill out the 45-strong securitization team, says Philip Basil, head of securitization. Last year, RBS was third on the sterling securitization league tables and this year Basil plans to boost the firm's presence on the Continent.

Robert McDonald is the finance director at Burton-upon-Trent-based Punch Taverns. The company is one of the U.K.'s leading operators of leased and tenanted pubs, with a nationwide portfolio of over 4,500 pubs. Punch Taverns has two securitizations outstanding, Punch Taverns and Punch Funding II.

Jeff Schumacher joined The Royal Bank of Scotland last week as a v.p. in its loan syndications group. Schumacher is coming from The Royal Bank of Canada, where he was a director in RBC's leveraged capital group managing middle-market syndication efforts. Schumacher affirmed that the new position was on the same level as his previous position at RBC, despite the title switch from director to v.p. Before RBC, Schumacher was at Heller Financial, where he also worked in the leveraged loan department.

Martin Currie Investment Management, an Edinburgh fund manager which currently invests solely in equities, is looking to hire a team of bond managers. Ross Leckie, head of marketing, says the impetus to add a fixed-income team is a response to clients' increased interest in the asset class. The firm will hire two to five managers, but Leckie did not say what types of fixed-income products Martin Currie will launch. Martin Currie has £6 billion in assets under management.

The financing for the upcoming M77 and Southern Glasgow Orbital project, which entails the extension and refurbishment of roadways in Southwest Scotland, will be completed using a whole business securitization. The deal, which will be roughly £150 million, will be lead-managed by Royal Bank of Canada and a monoline wrap is being provided by XL Capital, according to bankers familiar with the plans.

The primary market juggernaut just continues to roll as a further $12.5 billion in investment-grade volume and $1.5 billion in high-yield volume hit the market last week. This brings year-to-date investment grade volume to $45.5 billion with $19 billion of that being accounted for by supra/sovereign deals. The week was one for elephant-sized deals as GE began its annual borrowing program with $5 billion of 10-years that priced at 112 basis points and Italy launched a $3 billion 3-year deal. There is a distinct skew in the issuance pattern by rating so far this year with triple-A rated deals currently accounting for 31% of issuance versus 2002's full year total of 13%. This is relatively common as the liquid global benchmarks usually lead the market out of the gate in a new year, so we do not read the fact that the weighted average rating is now higher than at any point in 2002 as indicating a lack of risk appetite in the market.