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Varco International tapped Wells Fargo to replace leads ABN Amro and J.P. Morgan on the company's new revolver because the bank offered more competitive pricing on the deal. Varco went to the market looking for a bargain on the $125 million, three-year revolver following the expiration of its former credit facility. "Wells Fargo offered the most competitive terms," said Clay Williams, v.p. of corporate development. He said the chosen lead had the best structure and pricing at LIBOR plus 5/8 %. ABN Amro made an unsuccessful bid for the deal and J.P. Morgan has reportedly pulled out of the sector. Officials at ABN declined to comment. Officials at J.P. Morgan did not return calls by press time.

The primary market picked up again on some moderate stabilization in secondary market spreads. For the week, $10.75 billion of investment- grade corporate bonds hit the market. The demand was once again concentrated at the higher end of the ratings spectrum, with the two-tranche $3.5 billion deal for triple-A General Electric Capital Corporation reportedly seeing $6 billion in total demand. This is largely attributable to the strong technical position in corporates with investors having significant money to put to work as mutual fund inflows have continued despite the market volatility. Other notable investment-grade deals were the two-tranche $3.5 billion deal for General Mills, which was also reportedly well oversubscribed, and deals for Duke Capital and Citigroup. The high-yield market also bounced, with $1.2 billion in paper priced.

The primary market picked up again on some moderate stabilization in secondary market spreads. For the week, $10.75 billion of investment- grade corporate bonds hit the market. The demand was once again concentrated at the higher end of the ratings spectrum, with the two-tranche $3.5 billion deal for triple-A General Electric Capital Corporation reportedly seeing $6 billion in total demand. This is largely attributable to the strong technical position in corporates with investors having significant money to put to work as mutual fund inflows have continued despite the market volatility. Other notable investment-grade deals were the two-tranche $3.5 billion deal for General Mills, which was also reportedly well oversubscribed, and deals for Duke Capital and Citigroup. The high-yield market also bounced, with $1.2 billion in paper priced.

A wave of deals for pharmaceutical companies are coming to market amid burgeoning appetite from investors who view the sector as primed for consolidation and divestitures. Credit Suisse First Boston and Deutsche Bank are each leading deals in the market for pharmaceutical companies. Those credits come hot on the heels of Bank of America's loan for Accredo Health, which proved a home run with the buyside last week.

European fund managers say they are not interested in buying asset-backed bonds because single-A and triple-B rated corporate paper offers more upside. "If you're bullish on credit, it makes sense to buy lower-rated corporate paper which has more juice," says Davide Cataldo, Milan-based head of credit at Pioneer Investments. Even though ABS paper has become more liquid, Cataldo says he would rather buy riskier, more liquid corporate paper that allows for better trading flexibility. Lately, analysts have been warning investors to take a good look at ABS deals to see if companies are over-leveraging themselves, but investors are not interested in triple-A securitized paper.

Highlighting buyside hunger for health care credits, Credit Suisse First Boston and Citibank's $350 million acquisition credit for St. Louis-based Express Scripts, backing the company's acquisition of New Jersey-based National Prescription Administrators has already blown out, and the bank meeting has not yet even been held. "It's a highly rated BB credit, leverage is low, and the bonds are trading tighter than many investment grade names," said one banker. The official launch is this week, and pricing talk is LIBOR plus 21/ 4% or better, said a banker, but the credit is already full. "Investors rang up and said, 'I want $50 million,'" said one banker, commenting on the popularity of the credit. Express and NPA are pharmacy benefit management companies.

Fitch Ratings is looking to add a handful of analysts to its London office to bulk up its European structured finance group and to keep up with the amount of new business, says a firm official. Specifically, Fitch is looking for two commercial property analysts, a whole business securitization analyst and a surveillance analyst to keep tabs on commercial mortgage-backed transactions. Moody's Investors Service is also beefing up its structured finance team and aims to have over 100 analysts covering European structured finance by year-end (BW, 2/11).

Goldman Sachs has made several changes to the uppermost levels of its credit business. David Solomon, managing director and head of the firm's fixed-income credit business, will run equity capital markets, according to a Bloomberg message a high-yield salesperson at Goldman sent out to several clients on the buy-side. Currently, the co-heads of global equity capital markets are Mike Evans and Mark Tercek. Ed Forst, managing director and chief of staff, global fixed-income, currency and commodities division, has been promoted, along with Don Mullen, managing director and former head of leveraged finance, to co-heads of the credit business replacing Solomon. Mullen's position will not be filled, according to senior Goldman officials, and it could not be determined whom, if anyone, will replace Forst.

The new $450 million Graphic Packaging International deal, launched into the market earlier this month by Credit Suisse First Boston and Morgan Stanley, backs a company that is strong in its market but has an aggressive financial position, according to Standard & Poor's. S&P has slapped a BB rating on the credit, which refinances an existing $325 million deal. The facility is secured by substantially all of the company's assets, which should provide a material advantage to lenders, according to Pamela Rice, S&P analyst. But S&P's simulated default scenario shows that it is not clear whether the distressed enterprise value of the company would be sufficient to cover the entire loan. S&P views the company, which produces folding carton packaging for consumer goods concerns, as less vulnerable to cycles than other packaging companies. "There is fairly stable demand," Rice said. "They're not as cyclical as other paper companies." Rice explained that the company is rated on the attractiveness of its markets and its position in that market, its diversity of products, customers and geography, and also its cost position relative to competitors.

Hedge fund, D.E. Shaw, hired Max Holmes and Daniel Posner last week as part of an effort to expand its business to include distressed trading. Holmes and Posner will act as senior vice presidents to develop and implement investment strategies focusing on the distressed market. Holmes joins the firm after serving as founder and co-head of the high-yield group at RBC Dominion Securities. Posner joins from Intermarket Corporation, where he was a portfolio manager specializing in distressed securities. Posner and Holmes were unavailable for comment and calls were referred to a spokesman, who declined to comment further on their responsibilities.

Kmart's $2 billion DIP facility launched on Valentine's Day raised $500 million by the end of last week with bankers saying the market is reacting with enthusiasm. The deal is priced at LIBOR plus 31/ 2% across the board with a 3/4 % commitment fee on the $1.8 billion revolver. There is also a $200 million letter of credit facility for the bankrupt retailer, which has set out ambitious plans for a quick re-emergence in 2003, according to a banker. The tenor on the DIP is 27 months, in which time, Kmart plans to invest in new technology, close unprofitable stores, and terminate the leases of about 350 stores.

Ron Consiglio, wireline telecom analyst at Lehman Brothers, has resigned to move to Loeb Partners, a hedge fund, according to Mike Guarnieri, head of research at Lehman. Ryan Langdon, his counterpart at ABN AMRO, was let go amid rumors of a larger reorganization there, says an official at the firm. Mark Rose, a second-teamer on the 2001 Institutional Investor All-America Fixed-Income Team at Goldman Sachs, is looking to move internally, according to analysts close to him. The job changes among sell-side high-yield wireline telecom analysts come as underwriting activity has come to a halt and secondary issues are trading at distressed levels. Langdon and Consiglio could not be reached, though Langdon, in a recent interview with BW, had questioned his future at ABN AMRO. Rose declined comment. Langdon reported to Ray Stottlemeyer, London-based global head of high-yield research. He could not be reached at press time.