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J.P. Morgan,UBS Warburg and Goldman Sachs launched the bank deal for National Waterworks into a cautious market last Thursday. The $250 million "B" term loan reportedly is priced at LIBOR plus 33/ 4%, prompting one investor to demand more juice or a discount on the B1/BB- credit. "It's asset light, a split-rated credit and there is lots of leverage on the deal," he said, noting that total leverage is about 4.9 times. Bankers at the appropriate firms did not return calls.

Xerox's bank debt saw a flurry of activity last week, surging roughly five points. One trader said the company's stronger earnings, spearheaded by $611 million in operating cash flow for the third quarter, caused the rally. Traders noted that the company's revolver was trading in the 71-73 range and its "A" term loan in the 83-85 range. Xerox's "B" piece was quoted in the mid-90s, according to LoanX.

Goldman Sachs has priced the notes for Flagship Capital Management's second collateralized loan obligation, a $400 million cash-flow arbitrage vehicle composed of Ba3/B1 loans. The vehicle, known as Flagship CLO-II, came to market now due to a combination of factors, according to a market official. "The warehoused assets are at a size where it becomes economical to price the notes," the official said, noting that the assets are now about 70% funded. It was unattractive to increase the size of warehoused assets during the summer as spreads were so tight, he explained. The equity for the deal was obtained several months ago due, in part, to a reverse inquiry from investors in Flagship's first deal, he pointed out. Flagship officials declined to comment on the vehicle, and bankers at Goldman did not return calls.

There was a slightly better tone overall in the high-yield market through last Thursday, though it was largely offset by the damage to Charter Communications. Autos were among the better-performing sectors. In the new issue market, Nevada Power priced a $250 million deal in the private market. Here is some other action.

Invesco Asset Management is readying a E2.4 billion collateral synthetic obligation (CSO). The multi-tranche transaction is exposed to credit risk from a portfolio of credit default swaps. There may be a small portion of asset-backed securities in the structure. The deal is scheduled to be priced by year-end and one banker familiar with the transactions says it should have no trouble in the market given Invesco's sterling track record. Called Lisa, the deal is being lead managed by Dresdner Kleinwort Wasserstein. This is Invesco's second collateralized deal this year.

J.P. Morgan Securities has made some sharp cuts to its U.S. and European asset-backed securities teams, according to officials familiar with the reductions. The cuts come as a result of widely publicized headcount reduction plans at the firm. Approximately 10 ABS bankers were let go in London, including two managing directors. In New York, 10 junior- and mid-level ABS bankers were let go. Included in the New York reduction was credit-card banker Giuseppe Pagano. Mike Dorfsman, a firm spokesman in New York, says J.P. Morgan "remains committed to the ABS business," and "we believe our ABS groups are now appropriately sized."

J.P. Morgan Securities released Rick Patton, a senior high-grade salesman last week, according to several sell-side salesmen at rival firms. The move was confirmed by several of Patton's sales colleagues at J.P. Morgan. Patton could not be reached, and Bryan Weadock, head of corporate bond sales at J.P. Morgan, did not return calls. The move surprised a number of salesmen, as Patton had an excellent reputation on the Street. At least two rival sales desk heads say that they will take a serious look at hiring him. One says clients called him up and told him to hire Patton, while the other fears he may be drawn into a bidding war to hire him. Patton's buy-side clients were said to have included New York Life, Alliance Capital, Weiss, Peck & Greer and Tattersall Advisory Group.

After flexing pricing upwards, Lehman Brothers has filled the book on the $130 million "B" term loan for The Aerostructures Corp. The institutional tranche initially was priced at LIBOR plus 33/ 4%, but it was finally sold at 99 with a coupon of LIBOR plus 4%. Calls to Lehman bankers were not returned by press time.

Jeremy Hood, a v.p. in alternative assets at J.P. Morgan Securities, was let go two weeks ago, according to one of his colleagues. He reported to Romita Shetty, managing director and head of structured products. Hood reached at his home declined to comment, citing company policy. Shetty says Hood will not be replaced.

Allison Taylor, executive director of the Loan Syndications and Trading Association, put two former board members on the spot during a distressed trading panel at last week's LSTA conference, asking them why their institutions were not members of the trade association. The two buysiders, Chris Pucillo, portfolio manager at Stanfield Capital Partners, and Victor Khosla, chairman and ceo ofStrategic Value Partners, had been members of the sell-side during their time of board membership.

Charter Communications was the talk of the loan market last week, following the company's announcement that its chief operating officer, David Barford, was placed on paid leave due to the pending status of a grand jury investigation. The bank debt traded in the 81 1/2 - 82 1/4 context following the announcement, although dealers noted that trading was thin as market players got comfortable with the news. By week's end, the paper had slipped even further to the high 70s.

The primary market has entered a state of virtual permafrost as we record another week of dismal volumes. International Paper's $1 billion 10-year deal was the only corporate issue of note in a week that saw just $2.5 billion in issuance. The IP issue was upsized from an originally intended $750 million and tightened a couple of bp on the break, indicating that there is a degree of pent up demand in the market. Those issuers who meet the desired criteria as regards ratings stability and appealing spread have less need to issue however, in this economic environment and so the current depressed volumes are likely to be with us into year end.