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Genesis Health Ventures held a conference call on Oct. 11 to explain the difference between itself and competitor Kindred Healthcare, which recently recorded approximately $55 million in additional costs for professional liability claims above its normal provision. The charge, caused by the dramatic increase in professional liability costs in Florida, led to concerns among investors that the sector as a whole could be affected, tainting competitors such as Genesis and Beverly Enterprises, according to investors.

Deutsche Bank was rumored to have completed a $15 million trade of GenTek in the mid-50s last week after the company filed for Chapter 11 bankruptcy protection on Oct. 11. The company has stated that it will not seek a debtor-in-possession facility because, with $110 million in cash on hand and cash flow from continuing operations, it has enough money to fund operations and obligations to customers, vendors and employees. The market for the bank debt was quoted in the high 50s before the filing. Officials at Deutsche Bank declined to comment.

High-yield was up on the week through mid-Thursday, but there was no dramatic activity, according to Jon Budish, a trader at Jefferies & Co. "No money. A lot of short covering. No calendar. People don't have cash. You'd expect a rally with the stock market, but unfortunately it's just ebbs and flows," he says. Another trader says benchmark names such as Nextel and Charter were modestly improved, while technology issues were better in sympathy with a strong Nasdaq Stock Market. Here is other action.

Hyperion Capital Management is seeking a generalist corporate analyst for its investment-grade portfolio. The new hire will report to John Dolan, cio, and will analyze corporate credits for the $1.6 billion investment-grade portfolio, which has a single-A average rating. The position is a newly created one, says Dolan. He adds that with the new hire, eight corporate analysts will be assisting the two portfolio managers that manage the firm's corporate bond portfolio. Dolan says that after this hire, he is not anticipating adding to the group for the balance of the year.

ING Investment Management will release 11 members of its Hartford, Conn.-based subsidiary, ING Aeltus Investment Management, as it shifts $13 billion in fixed-income assets to its portfolio management team based in Atlanta. Tracy Sherman, an ING spokeswoman, says the decision was partly due to the superior performance of the Atlanta team, led by James Kauffmann, and also part of a broader decision-making process begun in mid-year about how to make the best use of the company's fixed-income resources. The mortgage-backed and quantitative groups will stay in Hartford, overseeing some $5 billion in assets.

Citibank andPNC Bank have advised Massey Energy to hold off on a new $525 million credit facility until market conditions improve. "We were advised by our lead banks that it might be a tough sell in the marketplace," said Katharine Kenny, director of investor relations. "We can't disagree that the markets are pretty tough." Operational improvements in the third quarter further alleviated the company's immediate need for the proposed $275 million "B" term loan, one banker noted. "We feel like we have sufficient liquidity given our current internal operations," Kenny concurred, adding that Massey can afford to wait on the deal. Indeed, the coal producer's improved cost structure in the third quarter yielded $140.5 million of total liquidity, about $68 million more than in the second quarter.

The Aerostructures Corp., a designer and manufacturer of aerospace structures including wings, fuselage sections and precision-machined components, has a relatively small revenue base, has a significant portion of its revenue tied to a single customer and is dependent on a weak market for commercial aircraft. As a result, Moody's Investors Service has assigned a B1 rating to the company's proposed $165 million senior secured credit facility, which consists of a $35 million revolver and a $130 million "B" term loan.

Conseco announced that it received a forbearance agreement from its lenders last week, but the bank debt continued to languish in the 58-61 range as no trades took place. An undisclosed seller was looking to unload a $30 million piece of Conseco bank debt, but the seller is finding the current levels for the paper to be too low, according to market players. "The buyers are in the high 50s, but the sellers aren't there," one trader said.

Daniel Arbess, head of special situations investing at Triton Partners, says the worst may not yet be over in terms of corporate defaults. He argues that more companies may face a refinancing crunch when senior secured bank debt negotiated in the late 1990s comes up for renewal in the next few years. Martin Fridson, high-yield strategist at Merrill Lynch, disagrees. He says that while leading indicators show that there may be a slight uptick in the default rate for the next few months, he expects a sharp drop in the default rate in 2004 and 2005.

The market value of defaulted bank loans hit an all-time low of 44 for the month of September, setting the table for a feast of upside potential. Edward Altman, Max L. Heine Professor of Finance at New York University, said a look at where distressed debt is now compared to where it usually ends up in terms of recovery bodes well for investors. "Historically, most studies have shown that recovery values for bank debt are roughly 70-80%," said Altman, one of the keynote speakers at the 7th annual Loan Syndications and Trading Association (LSTA) conference in New York. But these historical averages could be misleading in today's environment, and recovery rates may not be as high as they have been in the past, he cautioned.

Encompass Services' bank debt remained stable, albeit in the 31-32 context, after the company announced that it would pursue a pre-packaged bankruptcy plan. The restructuring plan stipulates that $200 million of the company's outstanding $600 million of bank debt will be rolled into a new term loan and the remaining amount will be converted into an 80% equity stake in the reorganized company. One trader estimated that the recovery value of the bank debt could be as low as 35 under this scenario. No trades could be confirmed last week, but one dealer noted that two weeks ago market players were interested in the paper for the value of the equity alone.