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David Petrosinelli, portfolio manager at Chicago-based Shay Assets Management, says the firm will reduce interest rate risk by allocating more to faster resetting securities in a move destined to reposition its $3.7 billion adjustable rate mortgage portfolio as it believes interest rates are about to rise. He reasons that in a rising interest rate environment, bonds that reset to a coupon in line with market rates perform better.

Last week, the Strategic Resource Institute held its sixth annual syndicated loans symposium at the Westin New York at Times Square. Topics included the increasing importance of the "B" investor, the state of the middle-market and increasing spreads on deals. Associate Reporter Judy McDermott filed the following stories.

Managing risk is the name of the game in the syndicated loan market these days and "B" loans have helped minimize losses and increase liquidity, according to Marsha Cruzan, managing director and head of syndications origination at Banc One Capital Markets. "The loan market does remain fundamentally healthy," she said in the conferences opening remarks. However, "Deals are clearly more difficult to syndicate than one or two years ago." Cruzan explained that "B" loans are on the rise with 29 so far this quarter with a spread averaging 479 basis points over LIBOR, 25 basis points higher than this quarter last year. She further noted that even utility lenders are getting attractive returns, with "collateral you can actually kick with your feet."

Barclays Capital has hired two top level credit derivatives professionals in a bid to become a major player in the European CDO and credit-default swap markets, according to Eileen Murphy, global head of agency CDOs at Barclays Capital in New York. The firm hired Paul Varotsis, executive director in structured credit trading at Lehman Brothers in London and the European chairman of the International Swaps and Derivatives Association's credit derivatives market practice committee, in the new position of European head of agency CDOs, and Olivier Staub, managing director and flow credit derivatives trader at Bear Stearns in London, as a director in a similar position. Varotsis and Staub declined comment.

Calpine Corp.'s bank debt has climbed about 10 points out of its hole as investors brush off fears of a near-term liquidity crunch and an early 2003 bankruptcy filing. Bolstering interest in the paper is buzz that the company is talking to its bank group to reduce the capacity under its revolver. Traders said that small pieces of the company's mammoth

The recent rush of issuance continued apace this week with $11.5 billion of investment-grade and almost $2 billion of high-yield issuance coming to market. The breakdown of issuers by rating category substantially skewed by the jumbo $4 billion two-tranche deal launched by GE Capital Corp., which is the largest corporate issue since the finance company tapped the market with a mega $6 billion deal in May of this year. The week also saw a large number of sizeable sovereign and supra deals which is causing both the average deal size and the average rating of issued deals to rise slightly. Nevertheless, risk appetite remains evident and the high-yield market is still providing a healthy pace of financing even though both high-yield and investment-grade spreads have weakened this week, partially to accommodate the ongoing heavy level of supply.

Credit Suisse Asset Management has folded the $2.5 billion in fixed-income assets from its Brundage, Story and Rose subsidiary into its own fixed-income group. The move is designed to cut costs and use its resources more effectively, according to senior fixed-income officials with knowledge of the situation.

Credit Suisse First Boston is shopping two credits for J.L. French Automotive Castings that the car parts maker needs by the end of the year to steer itself away from bankruptcy court. CSFB is in the market with an $85 million "C" loan and a $100 million second lien term loan the company will use to meet debt payments and pay down debt. "The big issue is amortization," said a banker. J.L. French missed a bond interest payment last week and has until year-end to cure the default. "They could meet the interest payment, but the company also has a $13 million bank debt amortization on Dec. 31, they might not have the money to make," he added. J.L. French is a Hidden Creek Industries portfolio company that makes car parts, such as oil pans and transmission cases. Repeated calls to the private equity shop and Mark Burgess, J.L. French's cfo, were not returned.

Standard & Poor's has hired John Iten as director in its insurance rating group. The position is a newly created one. He joins from Deutsche Asset Management (formerly called Zurich Scudder Investments). Iten reports to Robert Partridge, managing director and head of S&P's insurance group. Iten says at Scudder he was senior insurance strategist in charge of the core fixed-income portfolio strategy for third-party insurance accounts. He reported to Ray Helfer, managing director in charge of the insurance group. Calls to Helfer seeking comment on whether Iten's slot has been filled were not returned by press time last Thursday.

R.H. Donnelley's new credit backing the acquisition of Sprint's publishing assets broke into the secondary market last Wednesday, trading above par. Pieces of the oversubscribed "B" paper changed hands in the 100 1/4 to 100 1/2 context as original lenders looked to top off their allocations. The low point for the paper was a trade in the 99 7/8 range, one trader noted. Any Donnelley trades will not settle until January 2003, when the transaction is completed. Other recent directory deals have been trading in the same context. Dealers quoted the market for Dex Media East at 100 1/8 to 100 3/8 and Bell Actimedia's new term loan "B" was still holding its own in the par context as well.

Vanguard Health Systems works with more financially troubled hospitals than most of Moody's Investors Service's other rated health facility operators, said Russell Pomerantz, senior analyst. Vanguard's margins are below 10%, whereas most of its peers clear margins above 15%, he said, explaining the added risks of working with initially less profitable hospitals. This is a cause for concern, reflected in the Ba3 rating of the company's new $150 million "B" term loan add-on piece. "That's where the money's at," responded Trip Pilgrim, v.p. of investor relations for Vanguard, commenting on the added risk of working with these troubled hospitals.

Goldman Sachs is in the market with a $250 million "B" loan for San Jose, Calif.-based Sanmina-SCI Corp., an electronics contract manufacturer, after deciding to skip the gimpy pro rata market. The loan launched last Thursday with a bank meeting in New York, with pricing most likely to be between LIBOR plus 4-41/ 4%, said a banker familiar with the credit.