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At least two portfolio managers say they are considering shifting their positions in auto credits because spreads have begun widening in the sector after a three month rally. David Killian, portfolio manager at Stone Ridge Investment Partners in Malvern, Pa., says he is considering swapping out of 10-year General Motors paper to pick up a similar yield in five-year maturities. He says he would add GM because that is the auto credit in which he is currently lightest. He wants to wait and see if the name weakens further. Last Friday, GM's 6.125% of '07 were trading at 146 over five-year Treasuries. He says the notes were at least 50 basis points wider some three months ago.

Providence Capital is getting ready to roll out a hedge fund focusing on distressed bank debt. According to sister publication Alternative Investment News, the fund, called Mauretania Partners, will launch July 1. Historically, opportunities with companies that defaulted on their bank loans were due to fundamentals, such as cyclical markets. But now, in the post-Enron world, the firm is seeing more cases of distressed companies as a result of unethical management, according toTom Schmidt, founder.

Three leveraged credit facilities recently syndicated by Credit Suisse First Boston were oversubscribed last week, despite some investor grumbling over the opportunistic nature of the refinancings. Over the past couple of weeks, CSFB has been shopping a $255 million facility for Buffet's and a $530 million "E" term loan for Mueller. The firm also came to the market recently with a $600 million "C" term loan, jointly led by National City Bank, for OM Group. A CSFB banker declined to comment.

Debbie Grosser has left Salomon Smith Barney, where she was a director and corporate bond analyst covering the utility sector. A person familiar with the firm's plans says it has not yet decided what to do about a possible replacement. Calls to Robert Waldman, head of corporate bond research, were referred to Mary Ellen Hillery, a firm spokeswoman, who confirmed that Grosser has left but declined further comment.

Claudio Phillips, head loan trader at Salomon Smith Barney, resigned this week. Phillips reported to Jonathan Calder, head of loan sales and trading at Salomon. A spokesman for Salomon confirmed his departure but would not comment on whether the company will look to hire a replacement.

Los Angeles-based Special Value Investment Management, an affiliate of private investment firm Tennenbaum & Co., has closed an $885 million arbitrage collateralized debt obligation that includes what is believed to be the largest-ever equity tranche in a market-value CDO. The CDO, called Special Value Absolute Return 1, is composed of distressed securities including leveraged bank loans, high-yield bonds, equities and mezzanine pieces. The equity tranche is $300 million more than 30% of the vehicle. The average equity tranche for a CDO is 15%. "Our philosophy is to be cautious, and we don't want to be close to a default," said Michael Tennenbaum, former vice chairman of investment banking at Bear Stearns and founder of the investment firm, of the big equity cushion.

Tyco International's bank debt ticked up last week from the high 80s to the low 90s as investors look forward to the company's spin-off of the CIT Group. One trader said a sizeable amount of the company's February 2003 facility had traded in the 93-94 range earlier last week. Mid-week bids for the name were believed to sink to the 92 1/4 92 1/2 range before recovering to the 93 1/2 level after there were no sellers. A spokesman for the company declined to comment on the trades.

Fitch Ratings has downgraded the $1 billion senior secured credit facility of XO Communications to C from CC, reflecting an increasing risk of default. On June 17, XO filed for Chapter 11 bankruptcy protection after failing to reach a restructuring agreement with potential investors.

Accredo Health recently obtained a $325 million credit facility through Bank of America to fund its acquisition of Gentiva Health Services. Joel Kimbrough, cfo, said the timing of the new financing encouraged the Memphis-based company to choose its long-time lead bank. Accredo had to secure the underwriting commitment from B of A in early January because the Gentiva deal stipulated that the completion of the acquisition could not be contingent on whether the company obtained the necessary financing, he explained, noting that the credit was syndicated afterwards.

Alan Peterson has joined Aetna Inc. in Hartford, Conn. as a portfolio manager overseeing the firm's roughly $500 million in high-yield assets, according to people with knowledge of the situation. He replaces Jean LaTorre, who was promoted to head of fixed-income after Tim Corbett left for Hartford Insurance Co. earlier this year. Peterson's last position was as high-yield portfolio manager for CIGNA, which has since spun off and renamed its asset management arm as TimesSquare Capital Management. However, he left that firm close to a year ago. Peterson did not return calls, and LaTorre declined comment.

Apria Healthcare Group's lenders convinced the Lake Forest, Calif., healthcare provider to amend its $175 million "B" term loan after bringing to its attention successful repricings by other issuers. The amendment resulted in 100 basis points being shaved from the loan's old spread of LIBOR plus 3% and an extension of the maturity by one year to 2008, according to James Baker, cfo. "The success of similar companies was brought to our attention by our financial institutions," he said. "But current market conditions and the improving financial strength of the company were the factors behind the repricing."