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Bankgesellshaft Berlin (BGB), which manages E1 billion in fixed-income assets through its Luxembourg office, is looking at adding high-yielding, short-dated telco and auto paper. Marcus Volz, portfolio manager, says spreads are attractive on telco paper in light of the recent spate of bad news in the sector. He says he has no specific telco names in mind, but would like to buy after the bad news has been priced in. BGB is a buy-and-hold investor, and Volz says short-dated paper offers less risk, but still has an attractive yield.

Market players were not slow to condemn WorldCom and the corporate scandals that were coming thick and fast last week. But out of misery comes humor, according to Bloomberg. E-mails making the rounds of hedge fund managers include these proposed new accounting acronyms: EBITDA - Earnings Before I Tricked the Dumb Auditor; CEO - Chief Embezzlement Officer; and EPS - Eventual Prison Sentence.

This chart, provided by Citibank/Salomon Smith Barney Inc., tracks bid-ask prices for par credit facilities that trade in the secondary market. It also tracks facility amounts, ratings, pricing and maturities.

Manufacturers' Services Limited (MSL) has sealed a three-year, $100 million revolver and a $10.5 million term loan with lower interest costs, after slimming down its balance sheet and switching from a cash-flow deal to an asset-based facility. "The catalyst to the refinancing was that the old facilities were making less sense as MSL downsized its balance sheet," said Sean Lannan, treasurer. "The old facility was too large and inflexible in terms of international requirements."

WorldCom's bank debt lost its premium over the company's bonds last week after it announced that more accounting errors are likely to be uncovered. The market for the bank debt was quoted at a five-point premium to WorldCom's bonds because investors were hopeful that the bank group would strike a deal with the company to put their investment in a position senior to the bonds (LMW, 7/1). The bank debt is pari passu with the bonds, and the company's May 2003 notes were quoted in the 13-15 range, down from 16 1/2-17 the previous week. Traders said the market opened with an absurdly high bid of 20 for the company's $2.65 billion credit facility last Tuesday.

Weiss, Peck & Greer--the U.S. investment arm of Holland's largest asset manager, The Robeco Group--is prepping its second collateralized debt obligation, according to sister publication BondWeek. Called Robeco CDO V, the deal will be backed by high-yield bonds and loans. The arranger for the deal, Rabobank, currently is marketing the equity and the lower-rated debt tranches. The deal should be priced early next month, a CDO market official noted. Calls to Weiss, Peck & Greer and Rabobank were not returned.

Veridian has secured a $200 million credit facility as the last step toward a balance sheet restructuring. James Allen, cfo, said it was necessary to refinance the company's bank debt because many of the terms in the senior credit agreement had to change because of the restructuring. The Arlington, Va., information technology company, which serves the defense industry, now has a single layer of low-cost senior debt and a provision for up to $50 million that can be used for future acquisitions without bank approval, Allen noted, commenting on the advantages of the new facility.

In a holiday-shortened quiet week it was no surprise that investment grade issuance only totaled $3 billion bringing the YTD total to $282 billion. $1 billion worth of high yield deals were also priced. The illiquid conditions evident during the week also impacted the 4-week moving average deal size which has now dropped below $350 million, a low for 2002. Average credit quality is also slipping from the much higher levels seen earlier in the year and is now solidly at the BBB level.

The bank debt of Encompass Services was lowered from B1 to B2 as Moody's Investors Service fears that deterioration in non-residential construction, which has already damaged profitability, will put a strain on the company's covenant compliance efforts. The credit facility comprises a $300 million revolver, a $130 million "A" term loan and a $170 million "B" term loan.

Credit Suisse First Boston last week snared Robert Franz, v.p. and par trader at Morgan Stanley, adding a seasoned trader to a stocked bench in an effort to beef up its market coverage. The firm, one of the powerhouses in the loan trading market, is expanding its group because of an increase in the volume of trading among banks and institutions. Franz will be a director and senior trader working with par and stressed loans. A rival dealer noted CSFB is bucking the trend in the loan trading market. "They seem to be moving in the opposite direction of other banks, which are holding tight or scaling down," he said.