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Collateralized debt obligation equity investors are demanding principal-protected securities against credit risk. Arturo Cifuentes, managing director at CDO collateral manager Triton Partners, says principal protected securities are "an old trick" that has reappeared in more and more deals over the past few months. However, with U.S. Treasury bonds trading at high dollar prices, protection has a high cost attached to it, says a CDO analyst with a leading underwriter.

The bank debt of Conseco was said to have traded in the low 60s last week, shooting up from the 52 level where it had been trading since the company announced that it would have to pursue a more aggressive restructuring plan. Market players have mixed feelings about the name. "The story is still unfolding," one dealer said, predicting that the paper would remain in the 60s for at least another month. "It's hard to value," he added.

Dade Behring's new $575 million senior secured credit facility has received a preliminary B+ rating from Standard & Poor's, with the recovery value of the loan expected to be greater than 50% if the company was sold in a simulated bankruptcy scenario. The company recently negotiated a pre-packaged bankruptcy plan and will cut its debt by some $700 million to roughly $800 million, reducing its debt-to-EBITDA ratio to three times.

Fleet Bank and Bank of Nova Scotia launched syndication of a $475 million credit facility for Flexi-Van on Aug. 28, during a quiet week for new issuance. The credit refinances existing debt and backs the Kenilworth, N.J., company's $180 million acquisition of the chassis leasing businesses of GE Capital's TIP unit, a banker said. The acquisition needs to be completed by Sept. 17, which is why the deal was launched at the end of August, he noted. A Scotia banker declined to comment. Calls to officials at Fleet and Flexi-Van were not returned.

Citibank and J.P. Morgan's $1 billion credit facility for Burger King is garnering interest among buysiders as the mid-September launch date approaches. Some investors cited the experience of the Texas Pacific Group, Bain Capital and Goldman Sachs Capital Partners, which are purchasing the fast-food behemoth from Diageo for $2.26 billion. "Diageo has been bleeding [Burger King] for cash and is now spinning it out to a massively enthusiastic sponsor group," one banker said. "It will come out of the blocks doing well."

Lyondell Chemical has completed a mix of new financings in an effort to maintain the right balance between the bank loan and fixed-income markets, explained Karen Twitchell, treasurer. To accomplish this, the Houston-based company has reduced the size of its revolver from $500 million to $350 million and paid down $200 million of its $621 million "E" term loan. In exchange, it issued $278 million in 10-year notes and $115.92 million in common stock.

Two big blocks of bank debt traded during the slow week leading up to Labor Day weekend. Last Tuesday, a $13.5 million piece of Hayes Lemmerz International's pro-rata paper was auctioned off. One dealer quoted the trade in the 86 3/4-87 context, while another said it went off north of 87. No further details could be ascertained by press time.

Standard & Poor's has issued a survey to 700 corporate pension plans asking how they invest their pension balances and to quantify their unfunded liabilities, according to BW sister publication Money Management Letter. The survey is part of a broader move by the ratings agency to factor in more heavily the unfunded liabilities of corporate pension plans when rating companies' debt, says Scott Sprinzen, managing director of corporate and government ratings.

Fitch Ratings has placed Staples' on watch with negative implications after the number two office supply retailer in the U.S. announced plans to acquire the top European supplier, Guilbert. The move reflects the potential for increased financial leverage, the risks connected with Staples' increased exposure to the European markets and the company's aggressive acquisition mode. The watch covers Staples' $600 million bank facility and its $200 million in senior notes, both of which are rated BBB+.

State Street Global Advisors is developing a high-yield index fund--the second such fund ever. Bruce Walbridge, high-yield portfolio manager at the Boston-based firm, says the idea for the fund was hatched in the spring. Since then, however, high-yield has been hit hard by market-wide concerns about corporate creditworthiness. As of August 23, high-yield mutual funds had seen 11 consecutive weeks of outflows, according to AMG Data Services. With many credits trading at spreads of 1,000 basis points over Treasuries and yields averaging 14%, Walbridge said investors are more open to the possibility of such a fund than they were in the spring, when spreads were at roughly 700 over. Walbridge says State Street is working with Lehman Brothers to develop a customized index on which to benchmark the fund. He says the index will be publicly released.

TD Securities and Citibank are preparing an approximately $425 million bank deal for Bresnan Communications, backing its acquisition of cable television systems in Montana, Wyoming and Colorado from AT&T Broadband. The purchase was announced in April and was to be for $735 million in cash, but disputes over the value of the cable properties have held up the sale, a banker said. A spokeswoman for Bresnan declined to comment.

Euro Zing I, a E260 million collateralized debt obligation using a dual currency asset and liability structure, was launched last week by the Dublin-based ZAIS Group. The deal, which is backed by sterling- and euro-denominated CDOs and various asset-backed securities, is thought to be the first to use a dual currency structure. Mirja Wenski, portfolio manager at ZAIS, says the firm used the dual currency structure to gain access to the sterling assets, which represent 35-40% of the European ABS market.