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Tate & Lyle, a London-based global sugar, cereal sweetener and starch processing group, recently issued GBP200 million (USD300 million) in bonds and used foreign exchange swaps to convert the majority of proceeds into U.S. dollars and euros. Philip Brown, head of treasury in London, said there was investor demand for sterling debt and the fx swap offered the company the best execution on the deal. Brown explained that Tate & Lyle's primary borrowing currencies are U.S. dollars and euros. If it issues in a different currency it often uses fx swaps to convert offerings back into those currencies. The company, however, does keep a portion of its debt in sterling, although Brown declined to disclose that figure. Brown would not elaborate on the percentage of the offering converted into U.S. dollars and euros.

WestAM, the asset management arm of WestLB, plans to launch its first two hedge funds in September. Markus Stadlmann, director of global asset allocation, said the firm has been aiming to launch these types of funds to its existing clients because over the past two years it has seen strong demand from continental Europe for absolute-return strategies. Investors have been asking for investment vehicles that offer diversification benefits under adverse market conditions, he explained.

UBS Warburg and Merrill Lynch are structuring more inflation-linked credit-linked notes because of increased investor interest, which they predict will lead to additional business over the next year. Colin Alexander, director in structured products at UBS in London, said his group has structured a handful of transactions in the past month, and expects demand to grow at double that rate each month for the rest of the year. The bank structured a few of these investments over the past year, but Alexander said he is now spending half of his time working on these deals. A Merrill Lynch official confirmed it is working on these deals, declining further comment.

Melissa Parker, portfolio manager with Nelson Capital Management, says she will move 5%, or $10 million, of the firm's portfolio, out of agencies into top-tier corporates on the view that well-selected corporate names should perform well as the economy recovers.

Segall, Bryant & Hamill will look to sell corporate bonds while increasing its mortgage-backed securities allocation by about $60 million to move up in coupon. Jim Dadura, portfolio manager of $1.2 billion in taxable fixed-income, says the firm will start looking at 6.5-7% coupons in 30-year Fannie Mae and Freddie Mac bonds and 6-6.5% coupons in 15-year pass-throughs, probably after the Federal Reserve's first interest-rate hike. The firm will make the move in anticipation of an eventual decline in the rate of prepayments. Dadura says he expects the Fed's first move to occur late this fall, and he believes a 50 basis point hike is the most that will occur by year-end.

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.