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Charter Communications rallied a couple of points despite the announcement that an additional $1.4 billion of franchise costs and $1.2 billion in deferred income tax liability should have been recorded. Market players said the bank debt traded up to the 83-84 range from the 81-82 context because the news removed some of the uncertainty that has surrounded investigations into Charter's accounts. In addition, market players said the news had a net zero effect on the company's cash position. "It doesn't have any impact on cash flow," noted Eric Geil, Standard & Poor's analyst. David Andersen, Charter spokesman, explained that the franchise costs were actually on the asset side of the company's balance sheet versus the tax which counted as liabilities. "They cancel each other out," he said.

The spigot opened this week and the debt markets groaned under a wave ofissuance, the likes of which we have not seen for many months. By Friday morning supply totaled $22 billion for the week with the vast majority ($19.6 billion) in the investment grade arena. The resurgence in risk appetite is evident in the fact that nearly all the investment grade deals were in the single-A or triple-B rating category with recently out-of-favor names such as GMAC and Household able to tap sizeable demand. It was also interesting to note that several of the issuers that participated in last week's structured Core bond deal such as Kimco Realty and General Mills this week tapped the market under their own volition. Several of the deals were reportedly sparked by reverse enquiry from investors that did not favor the structuring constraints of the Core bonds but had appetite for some of the included names given their issuing levels.

Deutsche Bank has recently completed setting up a global credit arbitrage investment arm to invest in fixed-income securities and then either repackage or keep them on its balance sheet, according to BW sister publication Derivatives Week. The firm, dubbed Winchester Capital Principal Finance, could have a balance sheet topping hundreds of millions of dollars, according to market officials. Market officials said Deutsche Bank decided to set this up now because the CDO market has reached a size where it makes sense to have an independent entity investing in different CDOs. Another official speculated that Deutsche Bank had not turned its attention to this before because it had made enough money from its structuring desk, however now that CDOs are becoming harder to shift and margins are decreasing it is looking for new opportunities.

David L. Babson & Company, struggling with the high defaults in its 1999 high-yield collateralized debt obligation Perseus CDO, has taken another downgrade hit from Moody's Investors Service. The class B-1 and B-2 notes on the $565 million vehicle, have been downgraded from B1 to B3, with the ratings on watchlist for another possible downgrade. The vehicle is approximately 70% bonds and 30% loans, and though the defaults have been mostly bonds, both asset classes have been affected, said Rodanthy Tzani, an analyst in the structured finance group at Moody's. Managers at David L. Babson, a Massachusetts Mutual Life Insurance Company subsidiary, did not return calls.

Deutsche Bank last Tuesday launched syndication of a $240 million credit backing Grant Prideco's, $350 million acquisition of Reed-Hycalog from oil field service-company, Schlumberger. The line will consist of a four-year, $50 million "A" term loan priced at LIBOR plus 23/ 4% and a $190 million revolver with a LIBOR plus 21/ 2% spread, explained an official. There is a 1/2% fee for $25 million commitments and a 35 basis point fee for $15 million commitments. The company also intends to raise $175 million through a private placement of senior unsecured notes due 2009. If the bond offering does not pan out, there is a committed provision for a supplemental bridge loan, the banker said. The credit is fully underwritten and is an asset-based deal, he added. A Deutsche Bank spokesman declined to comment.

R.H. Donnelley's $850 million "B" piece has been oversubscribed and was set to close as Loan Market Week went to press, said a banker familiar with the credit. The remainder of the $1.55 billion loan package is expected to close early this week, with final terms scheduled to be completed after the holiday, he added. Lead banks Deutsche Bank, Bear Stearns and Salomon Smith Barney priced the "B" tranche at LIBOR plus 4%, while the spread on the $125 million revolver and $575 million "A" loan is LIBOR plus 31/ 2%. The deal also includes pre-payment penalties. Bankers on the deal either declined to comment or did not return calls.

Bell Actimedia's C$1.64 billion directories deal is en route to closing this week after some structural and price changes. The $725 million (C$1.1 billion) "B" loan is now a $625 million (C$950 million) "C" loan. A $100 million, six-and-a-half year "B" piece, denominated in Canadian dollars, has been carved out due to market demand, said a banker. Pricing was flexed from LIBOR plus 4% to LIBOR plus 41/ 4% on the "C" and there is a 1% original issue discount, he added. The tenor on the "C" tranche is eight-and-a-half years and there is call protection at 101, a banker added.

A $10 million auction of AES Corp. bank debt went off in the low 80s last Monday, said traders. The buyer and seller could not be determined. The auction occurred as the Dec. 3 deadline approaches for a crucial exchange offer of up to $500 million of senior notes due 2002 and 2003 for new securities and cash. "It's very critical that they have that refinancing," said Mona Yee, a Fitch Ratings analyst. The company has $300 million of senior notes that mature on Dec. 15. If AES cannot complete its exchange, meeting that maturity will be difficult, explained market players.

At least three high-grade sell-side analysts and one investor argue that a number of telecom credits have likely gotten ahead of themselves. Seven of the nine U.S. credits in the sector were trading through their 18-month averages last Tuesday, according to Doug Colandrea, head of high-grade research at Bear Stearns.

Credit Suisse First Boston, J.P. Morgan, Lehman Brothers and Deutsche Bank are waiting until after the holidays to launch syndication of a $1.8 billion dollar credit backing The Blackstone Group's $4.7 billion buyout of Northrop Grumman's TRW Automotive business. "There's no way [the banks] could close it before the holidays," a banker said, saying that the delay is a calendar issue. The line will consist of a six-year, $500 million revolver and a $410 million "A" piece. The pro rata is priced at LIBOR plus 3%. There is also an eight-year, $900 million "B" term loan with a LIBOR plus 4% spread. The revolver offers a 1/2% commitment fee. Bankers on the deal declined to comment or did not return calls by press time.

Investors are gobbling up the bank debt backing Del Monte's acquisition of certain businesses from H.J. Heinz, and they're especially fond of a $300 million senior secured floating rate note being syndicated to buysiders. "It looks like a bond, but is priced at LIBOR plus 41/ 4%, has the same collateral package as the bank debt and is noncallable for five years," said one buysider. This is 1/4% higher than the $500 million "B" piece, which had already gained between $200 and $300 million of commitments a day after launching last Thursday, said a banker familiar with the deal. The investor said institutions taking the "B" would also probably be eligible for the note.

The Italian small cap market is leading a recovery in marketed transactions, with one IPO closing this week and two more set to launch next week. Fiera Milano, Europe's second largest conference centre, will next week launch an IPO which should raise Eu200m-Eu300m. On Wednesday the company received approval for its listing from Consob, the Italian regulator.