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Bankers are eyeing the $1 billion bond issuance for Dex Media East-the first part of the acquisition of Qwest Communications International's directories business-as an indicator for the prospective waterfall of leveraged buyouts coming to market this quarter. Although the bank market seems robust enough, questions are being raised over the depth of the bond market. Investors said the directory deal, one of the strongest contenders and a frontrunner for a slew of other financings, should clear the bank market, albeit with a 1/2% flex up to LIBOR plus 4% and a discount. But the bond market could prove tougher for this deal and others, leaving bankers uncertain whether there will be a resurgence for the battered LBO sector.

Rural/Metro Corporation has amended and extended its unsecured $152 million term loan in order to bring the company into full compliance with its covenants. After a series of six extensions to a March 2000 waiver, the company and its lenders, led by Wachovia Bank, established an amendment setting more manageable provisions, said John Banas, senior v.p. and general counsel.

Arch Coal has seen its bank group shift radically as a greater portion of a $675 million credit facility for its subsidiary, Arch Western Resources, came from institutional lenders. According toJames Florczak, treasurer, about 12-15 of the 30-40 syndicate members were institutions when the subsidiary secured its original term loan in 1998. This time around, however, there are about 12-13 banks in the 40- to 50-member syndicate, he noted. "The proportion has totally inverted," he said, explaining that fewer banks are looking to invest in the natural resources sector and institutions have picked up the slack.

Royal Bank of Scotland is seeking to hire a European high-yield trader for its London office, says an official familiar with the search. The position is newly created and the trader will report to Stuart Booth, head of structured credit. Booth could not be reached for comment. Although many other firms are scaling back in high yield, RBS is hiring because it has a small team in place and wants to maintain its presence until the market pulls out of this quiet period, notes the official. Nick Coates heads up RBS' high-yield origination effort and the firm also has three analysts covering the asset class.

The 25% loss recently reported by hedge fund manager Beacon Hill Asset Management was a result of a series of duration bets gone awry, according to several mortgage-backed securities professionals who have traded with the hedge fund. In short, the fund had structured a leveraged bet that interest rates would not continue to drop; when rates continued to decline, the fund was stuck with a large short position in the 10-year note, the primary beneficiary of the rate rally. Beacon Hill's CIO, Tom Daniels, referred questions to Wallach and Associates, who did not provide comments by press time.

TD Securities has hired Donald Noe to the new position of head of global research, supporting portfolio management teams in the U.S., Canada, Europe and Asia, according to Derrick Herndon, New York-based portfolio manager at the firm. Herndon says the hire is part of an effort begun firm-wide roughly a year ago to actively manage the firms' credit portfolios. Noe was a senior managing director at Moody's Investors Service, but resigned in May 2001. He could not be reached, and his reporting responsibilities could not be determined.

The University of North Carolina at Chapel Hill may look to hire one additional distressed debt manager over the next six months. The roughly $1 billion endowment is nearing the top of the allocation range with which it is comfortable, but there may be an opportunity to move a little higher, according to Mel Williams, v.p. and director of private equity investments. "The distressed market is still attractive, and there are some strategic gaps [in our portfolio] that we might be able to fill with a new manager," Williams said. He noted, however, that it has yet to be determined whether any additional investment will go to a new manager or an existing one. UNC's seven-person investment team will make a decision before the end of the year on the additional allocation and how to best fill it.

Though bond spreads have already widened significantly for Royal Ahold NV, an international supermarket retailer headquartered in the Netherlands, a buy-side analyst suspects that the worst may be yet to come. Arguing that the company has grown largely through acquisitions, the analyst calls Ahold "the WorldCom of supermarkets." While she has no evidence to suggest that the company is fudging its numbers, she questions how same store sales could be growing by roughly 4-5% along the Eastern seaboard, while competitors such as Krogers and Delhaize Group are seeing sales anywhere from slightly down to barely improved. "It's really hard to imagine that when same store sales are unchanged everywhere else, Ahold is just kicking everyone's butts."

The bank debt of Wyndham International dropped from the low 80s--with a $2 million piece of its "B" term loan trading at 73--following the company's announcement that it would revise its EBIDTA guidance for the third quarter downward from $82-87 million to $60 million. The market for the name was wide last week, with offers sinking to 76 and bids falling into the high 60s by Thursday evening. Traders said there were likely be more buyers than sellers at those levels, while others noted that the revision was expected.

Armstrong World Industries has reduced the borrowing capacity under its debtor-in-possession facility for the third time in two years. The facility, which started as a $400 million revolver, is now down to a $75 million letter of credit facility. Because the new agreement eliminates the company's ability to borrow under the line, Armstrong will save substantially on fees, dropping its annual payments from $174,000 to $59,000 after paying $125,000 in fees for the changes. "This reduced facility is more than sufficient, and we are pleased with the resulting savings in related fees," said Leonard Campanaro, cfo.

Even though the first-loss tranches of collateralized loan obligations have been responsible for keeping some deals from coming to market all year, the double-B and triple-B tranches of deals that have gotten off the ground are being touted as some of the best picks for the final quarter of 2002. According to Lang Gibson, director of structured credit research at Banc of America Securities, there is real value in these tranches of CLOs, which offer high risk-adjusted returns.

Bank of America, Key Bank, Merrill Lynch and Morgan Stanley are set to lead a $875 million credit for The Timken Company backing its $840 million acquisition of Ingersoll-Rand's Torrington subsidiary. Glenn Eisenberg, cfo, said the facility will comprise a five-year, $500 million revolver and a one-year, $375 million term loan. A bank meeting could be held by the end of this week to discuss terms of the facility, a banker familiar with the deal noted. Officials at the lead banks either declined to comment or did not return calls by press time.