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Approximately $25-35 million of Tyco International February 2003 bank debt was auctioned in the 94-95 range on today, although some said the market for the name was more accurately represented at the 93-94 level. Market players said the name was moving because investors are anticipating troubled waters ahead and wanted to lower their exposure to the company's paper. The bank debt has fallen from the 94 1/2 to 96 1/2 level where traders had quoted it last week.

Apria Healthcare is reportedly looking for a 100 basis points cut on it's $175 million "B" loan after a government investigation into the company's Medicare billing practice led nowhere. "The hot market and shortage of paper is also allowing issuers to return to the market and get cheaper deals," said a banker. Bank of America is leading the BBB-/Ba1 deal and is looking to take pricing from LIBOR plus 3% through a 100% amendment. One banker familiar with the deal said, "the government cost the company a lot of money unnecessarily."

Bear Stearns has filled the "C" tranche created for Appleton Papers,with almost all the current investor group rolling into the deal. Closing will be on Thursday, said a banker, adding no new investors were invited into the deal. Some buysiders and bankers cited the deal as a challenge, pointing out the new $115 million "C" tranche is priced 1% below the existing "B," which offers a spread of LIBOR plus 4 1/4%. The original credit launched last year had to overcome concerns that Appleton operates in a sunset industry, at a time when the buyside was gun shy about committing to all but the defensive credits on offer (LMW, 8/10).

UBS Warburg and Deutsche Bank will launch a $165 million high-yield bond deal and syndicate a $30 million revolver to back the buyout of Dave & Buster's by senior management and Investcorp. The acquisition price is $255 million, including the assumption of Dave & Buster's debt, explained an Investcorp spokesman, who declined comment on the structure of the debt financing. A banker familiar with the deal said the company is more interested in long-term money than with using bank debt to fund the deal. Pricing has not yet been decided. "It is likely UBS and Deutsche Bank will look to bring in a couple of Investcorp relationship banks on the revolver," said the banker

Carl Icahn is in the market for XO Communications bank debt, making a direct appeal in a letter to investors in the credit and pushing levels up 6-7 points. Market players said Icahn has sent a letter to XO bank debt holders rather than work through Wall Street trading desks in search of a bank position. Approximately $25 million was believed to have changed hands as high as 52, although the amount that Icahn bought could not be determined. The debt had been trading in the 46-47 range. Icahn's office declined to provide a copy of the letter sent to investors.

ABN AMRO plans to merge its global cash and credit derivatives trading groups. The group will be headed by Niall Cameron, managing director and global head of credit trading and debt syndication in London. Cameron said he will finalize the rest of his team over the coming weeks.

AEP Energy Services, the European wholesale energy marketing and trading subsidiary of American Electric Power, has received internal approval to start trading weather derivatives in Europe and plans to pull the trigger on its first trades in the coming months. Thor Lien, managing director in Oslo, said AEP will concentrate on structured products, such as precipitation index swaps for hydroelectric power plants. He added the energy company will also structure products linked to temperature and, if there is demand, wind speed.

Alliance & Leicester, with approximately GBP2 billion (USD2.92 billion) in capital, is considering entering the credit-default swaps market for the first time. An official at the Leicester, U.K.-based mortgage bank said it will use credit-default swaps if it determines there is no significant documentation risk. In addition, the bank would be looking at writing protection for high-grade entities. "It is all about certainty," he said, explaining that the bank would like to see clearer documentation of what defines a default and tightening of the cheapest-to-deliver rules. It is unlikely to enter the market within the next six months, he added.

One-month euro/dollar implied volatility rose last week as the euro appreciated against the dollar and reached levels not seen since Sept. 17. Implied vol reached 9.5% last Wednesday from earlier in the day when it was at 8.55%. Leveraged accounts were buying euro calls with strikes at USD0.935 when spot was trading at USD0.92, traders said. The single European currency was trading between USD0.91-0.92 at the beginning of the week.

Credit Suisse First Boston has set up a specialist marketing and sales team for major credit derivatives end users and boosted its structuring and trading capabilities. The group, dubbed flow credit derivatives coverage, is headed by Rob Lynn, managing director, according to market professionals. The firm has also hired Peter Nguyen, v.p. marketing to hedge funds and convertible arbitrage accounts at Merrill Lynch, to work in the new group. The firm set up the desk to cater to the growing demand from companies, such as hedge funds, insurance companies and banks' with large loan portfolios, who are regular users.

Covered call option writing by Japanese corporates has rocketed over the past few weeks, according to market officials. One trader said his firm is receiving around 30 requests per day, compared with 10 inquiries a month or two ago. Another estimated trades had increased by around 30%. "People are starting to believe that the economy has bottomed out," said Jim Clark, head of equity trading at UBS Warburg in Tokyo.

Bear Stearns recently moved Wee Siang Lee, associate director of credit derivatives in London, to the Tokyo desk in a similar role as part of the firm's buildup in credit derivatives in Japan. He reports to Ralph Orciuoli, head of credit trading in Tokyo. Lee said he will focus on structured transactions, such as trading baskets of credit-default swaps. "We're getting a lot of inquiries," he added.