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Deerfield Capital Management is raising up to $150 million for a distressed fund that will allocate 80% of its capital to high-yield bonds and syndicated bank loans. "Bond defaults are at a 10-year high, and last year distressed loan trading stood at $41.8 billion," saidJohn Brinckerhoff, director of marketing, on the timing of the fund. "The growth in the market has outpaced the capital allocated to the asset class." Additionally, distressed debt does better in an economic recovery, he noted.

Robert Lefkowitz has left Delaware Investment Advisers in Philadelphia, where he was a high-grade trader, to join Deutsche Asset Management in New York as a high-grade industrials trader and v.p. sector manager. Lefkowitz says he made the move because he wanted to return to New York where he grew up and started his career. He will report to John Ryan, managing director. Ryan did not return calls. Ryan Brist, who manages Delaware Investment Advisers' core and core plus institutional assets, declined comment about his plans regarding a possible replacement for Lefkowitz.

Two distressed securities analysts have widely different views of the worth of WorldCom's holding company bonds, all of which were trading at 13.5 cents on the dollar last Tuesday morning. Matt Breckenridge, an analyst at DebtTraders, which holds a proprietary position in WorldCom, believes the bonds are worth far more. He says he would begin selling the bonds in the 40s or 50s, a level he believes the bonds will reach as investors gain a better understanding of what the company's future EBITDA will be. He says the bonds trade at approximately one times EBITDA, and adds "You can buy any company's bonds at one times EBITDA and make money." He estimates the value of the company at four times EBITDA, arguing that it will not decline rapidly because it has a number of customers locked into long-term contracts. Breckenridge says the industry consultants with whom he has spoken are largely advising their clients to continue using WorldCom's services, though some are advising clients not to sign any new contracts. Breckenridge would not disclose the size of DebtTraders' position in WorldCom.

FleetBoston Financial and Bank of America are in the market with a $475 million refinancing package, split between $300 million of bank debt and $175 million of senior subordinated notes, for Casella Waste Systems. The recent softening of Allied Waste in the secondary loan market should not impact syndication of the new facility, as Casella is a regional waste services company with separate issues, one buysider noted. In addition, the bank refinancing is being done with existing lenders, who are supportive of the credit, the buysider said. Calls to Richard Norris, cfo of Casella, and officials at the banks were not returned.

Quantitative models used to identify potential defaults and ratings shifts in the corporate bond market are gaining in popularity given the shocks of Adelphia, WorldCom and numerous other Chapter 11 filings, say investors and executives at the two independent providers of this software.

A convertible bond, backed by a fund of hedge funds and offering investors daily redemption options at net asset value will hit the Eurobond market at the end of the month, says Lars Jaeger, partner with Partners Group. Partners, a Swiss hedge fund asset manager, has structured the securitization and Merrill Lynch will underwrite the offering, he says. The notes will consist of one E200-300 million tranche offered to European institutional investors. Partners plans on offering U.S. dollar-denominated tranches at a later stage. The notes have a 10-year maturity, offer a 1% coupon and are capital-protected by Société Générale. In addition, the deal may be rated AA- by Standard & Poor's, says Jaeger. Bill Berry, the Merrill Lynch banker in charge of underwriting, did not return calls.

Mirant is offering to pay an extra 100 basis points and reduce the size of its $1.125 billion revolver by one-third in order to complete a refinancing, but it is asking its banks to give something up in return. The company is demanding that a material adverse change (MAC) clause is not introduced into its facility and that the option to term out the loan for one year is kept on the table. "Obviously, the bank market is trying to reduce exposure to our industry, and we have proposed to reduce the bank facility by a third," saidRaymond Hill, cfo. "We're also willing to pay higher fees, as long as we are granted the things we need." The current facility matures on July 17 and, if it is not refinanced by then, the company can term it out -- not a desirable outcome for the banks.

Merrill Lynch has hired Craig Krandel from Credit Suisse First Boston's mortgage backed securities sales group. Krandel had left CSFB and was unavailable for comment by press time last Wednesday during the holiday-shortened week. Krandel, whom a senior Merrill official says will start in approximately one month given CSFB's non-compete policy, will be in a newly created slot. Harley Bassman, head of Merrill's mortgage group, declined comment citing corporate policy.

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

OppenheimerFunds has hired James Sivigny as a senior high-yield analyst covering the oil and gas, utility and chemical sectors. Sivigny will be based in New York and report to David Negri and Tom Reedy, co-heads of high-yield at OppenheimerFunds. Negri says the firm will look to add an additional analyst or two, primarily to follow the healthcare and cable sectors. It has already begun interviewing candidates. He says the hires are primarily replacements, though OppenheimerFunds has added some new junior research positions. He declined to go into further detail, however.

Cinemark USA's plan to conduct an initial public offering and refinance its bank debt has prompted the rating agencies to turn positive on the movie-theater operator. The reduction of senior secured leverage from $350 million to $250 million is one of the reasons Moody's Investors Service has rated the company's new credit facility B1, one notch above its senior-implied rating and three notches above its bonds. The new facility, which consists of a $150 million term loan and a $100 million revolver, has been rated BB- by Standard & Poor's.

Holders of WorldCom's approximately $30 billion in bonds are beginning to form committees and hire legal representation in an attempt to recover as much as possible from the scandal-ridden telecommunications company. Distressed players say they expect a long and bitter fight between several classes of bondholders, not to mention bank lenders, who account for about $3 billion. Scott Klein, managing director at MW Post Advisory Group, says he is organizing a group of MCI bondholders, but did not elaborate, and did not return calls by press time last Tuesday during the holiday-shortened week. At least two sell-side traders say they are aware of a committee of intermediate bondholders that is forming. A group of investment-grade bondholders, each of whom has $500 in exposure, is also said to be seeking legal counsel.