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Between $300-400 million of Leap Wireless International vendor-financing paper has traded over the last two weeks at heavily discounted levels as companies such as Ericsson, Nortel Networks, Qualcomm and Lucent Technologies look to escape exposure to the distressed name. Specialized hedge funds are said to be the buyers of the paper, with distressed-debt specialist The Seaport Group brokering the paper. "The vendors are not set up to think about the world this way," said a trader. "The distressed investors are playing on what they think the value in a reorganization will be," he added. Officials at Seaport declined comment.

When viewed over a span of decades, it becomes clear that the direction of interest rates is highly correlated with inflation. Thus, any successful attempt to forecast interest rate movements must also be an attempt to forecast inflation.

Realty Income Corp. has completed a new $250 million credit facility with a reduced borrowing rate, thanks to an improved borrowing environment for real estate investment trusts. "The reduced rate is associated with a tightening of pricing in the REIT industry lending market since we last did our facility in 1999," said Paul Muerer, executive, v.p., cfo and treasurer, who also speculated that the pricing improvement was based on a positive view of the company by the banks. The line is priced at an all-in drawn rate of LIBOR plus 120 basis points, while two previous lines stood at LIBOR plus 145 basis points. The new facility is attached to a ratings-based grid and Realty Income's BBB-/Baa3 ratings are in investment-grade land, Muerer explained. He added that the company's ratings have remained unchanged since being first-rated in 1996.

Scudder Investments has elected to liquidate its Floating Rate Fund on Dec. 20, due to weak credit conditions and low interest rates, according to a letter sent to shareholders by Scudder Distributors, investment manager to the Scudder funds. "Even though Scudder believes the market conditions will eventually improve, we believe that investor sentiment toward the bank loan market and bank loan funds will not easily change, limiting future growth rate opportunities for Scudder Floating Rate Fund," the letter states. The fund was valued at $130 million on 6/30/02. Loan-participation funds have been hammered for some time, though some investors are predicting an upturn in the cycle (LMW, 3/17).

The second white paper from the Bank of International Settlements addressing the risk weightings for securitization under the proposed Basel II rulings is still receiving a thumbs down from European asset-backed bankers and analysts. The paper, which proposes a 12% risk weighting for triple-A rated ABS and up to a 244% risk weighting for double-Bs, has some market participants fairly miffed.

Deutsche Bank and Wells Fargo Bank kicked off syndication of a $275 million credit for Veritas DGC with bank meetings in Houston and New York last Tuesday and Wednesday, said a banker familiar with the situation. The facility will refinance the company's existing revolver as well as $135 million in senior notes that were callable after Oct. 15, but do not mature until October 2003. The facility includes a $75 million, three-year revolver with pricing based on a grid ranging from LIBOR plus 21Ž 4-3%. The line also includes a $200 million, five-year term loan priced at LIBOR plus 31Ž 2% with a 1/4% upfront fee.

A pair of sell-side analysts say spread widening is likely to continue for Cigna, even as bond spreads have gapped 100 basis points over the last few weeks in the wake of three successive earnings charges. "Cigna has erased much of the credibility it's enjoyed over the past couple of years," says David Havens, an insurance analyst at UBS Warburg, and a third-teamer on the 2002 Institutional Investor All-America Fixed-Income Research team. He says the recent charges have erased 25-30% of the healthcare insurer's net worth. "Call me old-fashioned, but that's not what you expect to see out of a single-A rated credit," he says.

Spear, Leeds & Kellogg has hired Ryan Bloom from J.P. Morgan Securities, where he was a high-yield analyst covering the food and paper and packaging industries. Bloom declined comment, as did Doug Conn, head of high-yield research at J.P. Morgan.

The three banks shopping a $420 million term loan to cover CenterPoint Energy's debt maturities due Nov. 15 are pushing up against a commitment deadline this week. The new loan, led by Bank of America, Credit Suisse First Boston and Deutsche Bank, is the key to a financing package that quells the threat of bankruptcy for the company. A $4.7 billion package completed last month by J.P. Morgan and Citibank is contingent upon the company securing the $420 million credit with a separate bank group. If the second credit does not come through, the company faces accelerated maturity on the $4.7 billion credit Nov. 15. Commitments for the $420 million credit are due Thursday and the deal is scheduled to close Nov. 13. "The timing's really tight," said one buysider, noting that the deal's security structure is complicated and the time frame is short. "It may be tough" to close in time.

Traders reported some action with Charter Communications paper after Moody's Investors Service lowered multiple debt ratings on the cable operator. One trader said there have been trades in the 77-81 range, but the paper is now sticking in the high 70s. Toward the end of the week, a trader noted there was a bid of 80 for the paper. Traders declined to name any of the players involved or the size of the trades.

Paco Torrado, a par trader at CIBC World Markets, has been let go by the firm as part of a round of layoffs. CIBC has announced intentions to reduce staff levels by approximately 240, primarily in the U.S. The cuts come as a result of the continued low level of business activity, particularly in investment banking, according to a company release.