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Oaktree Capital Management, one of the most well-known high-yield and distressed debt money managers in the industry, is considering launching a $500 million to $2 billion add-on fund to its $2.5 billion distressed debt fund, according to BW sister publication Money Management Letter. The fund would consist of a mix of loan and bond assets from issuers that have tanked. Howard Marks, chairman of the Los Angeles-based firm, says it is considering the move because of the recent uptick in defaults and bankruptcy filings due to the weak economy. The first fund's closing was on Sept. 28 with $1.5 billion, and its second closing will be Dec. 20 with an additional $1 billion. About 20% of the existing assets in the fund come from foundations and endowments, says Marks. The minimum investment would be $3 million and the annual management fee would be 1%.

Oaktree Capital Management, one of the largest distressed debt money managers, will be shopping in the secondary loan market for distressed credits in the new year now that the firm completed raising a little over $2.1 billion for the final closing on its OCM Opportunity Fund IV. Howard Marks, chairman of the Los-Angeles-based firm, said it is looking for bargains in a volatile market. Marks declined to be specific about credits the fund is eyeing, including Enron and other well publicized distressed names. The increase in available distressed deals as a result of bankruptcy filings makes it a good time for the fund to invest, he said. A percentage of the fund will invest in high-yield bonds as well as loans, but Marks said it's impossible to determine percentages in advance. Future market conditions will determine the breakdown.

The condition of Captain D's bank loan is concerning rating agencies as a $135 million Bank of America led facility has not yet been refinanced and arrangements have not been made to extend the maturity of the credit, despite the fact the loan matures at the end of this month. Moody's Investors Service has put the senior unsecured bank loan rating on review for downgrade and Standard & Poor's has downgraded the corporate credit ratings on the expectation the loan should have been refinanced by now. S&P has the corporate credit rating hovering at CCC. Moody's has the loan at B2, recognizing the secured bank debt would achieve substantial recovery. Captain D's is a Nashville, Tenn.-based seafood restaurant chain.

U.S. Can's bank debt ticked down last week in a small trade to 81-82 from the 86 range. Size estimates were $5 million. The credit was in the 93 range prior to the company announcing it would be seeking an amendment. Dealers said the company's amendment was approved two weeks ago, but with limited fanfare. "I think lenders were expecting more money from the equity sponsor [Berkshire Partners]," a dealer noted. The Lombard, Ill.-based company makes steel and plastic in the U.S. and Europe. Calls to John Workman, cfo, were not returned. Diane Steel, spokeswoman, declined to comment.

While the par market nearly ground to a halt last week, dealers reported some further softening in the telecom sector. Nextel bank debt traded in the 90-91 range, down from a recent high of 93-94. "It's just following the bonds down," reported a dealer. Technicals were also faulted for the softer prices, as the dealer remarked there's no new information out on the company. Meanwhile, bids for Charter Communications' debt have come down half a point to 98 3/8, but the offer reportedly hasn't moved. Calls to Kent Kalkwarf, cfo of Charter, were referred to spokesman Dave Anderson, who did not return them. Calls to Paul Saleh, cfo of Nextel, were not returned. Further calls to Paul Blalock, head of investor relations, also were not returned.

Westar Financial Services, a prime auto lease securitization originator and servicer with $625 million worth of bonds outstanding, is looking for an acquirer. "We are talking to a few people [about] selling our portfolio, our origination and servicing platform, or the company itself," says Bob Christensen, president and ceo. Westar's portfolio represents 25,000 accounts totalling $625 million. No pricing has been set for the acquisition, he says. Christensen says his firm's difficulties started last month, when Bank One terminated its obligation to make further loans to Westar under a credit facility because Westar failed to complete a term asset-backed transaction in the given timeframe. Asked whether he was going to sue Bank One, Christensen would only say that, "Westar has sought counsel and will take the steps necessary to protect the value of its assets and of the enterprise itself." Other factors have contributed to delay the securitization attempt, he says, such as the effect of Sept. 11 on the capital markets and insurance industry. Christensen says Bank One's decision resulted in the end of Westar's origination business because the company is deprived of its source of funding. Thomas Kelly, a Bank One spokesman, declined comment, citing client confidentiality.

The large number of defaults this year by investment-grade companies has called attention to the relative limitations of investment-grade indentures, according to Sherri Andrews, head of high-yield research at BNP Paribas. Andrews says that when there are inherent problems with a credit, tighter indentures cannot protect bondholders from heavy losses on their investment. In certain cases, however, such as that of U.K. telecommunications equipment-maker Marconi, bondholders risk having their claims subordinated to the bank lenders as the bank debt matures and credit lines are renegotiated. While high-yield indentures typically contain protections that prevent banks from stepping ahead of bondholders in the capital structure, investment-grade issues, such as Marconi's, rarely do. Andrews argues that investment-grade bonds should contain protections such as negative pledges, which stipulate that if unsecured bank lenders demand security for a loan, bondholders receive similar security, allowing them to remain pari passu to holders of the bank debt.

J.P. Morgan and Citibank/ Salomon Smith Barney are doing early work on a new expanded commercial paper backstop for Hewlett-Packard Company, likely to emerge in the first quarter next year. Ken Frier, assistant treasurer for Hewlett-Packard, said, "We are raising a new backstop with Salomon and J.P. Morgan to replace the old five-year Salomon-led facility, maturing in April 2002." The old facility was $1 billion, he noted, but the new one will be larger for two reasons. "When we merge with Compaq, theirs will terminate," he said. "The new one will need to encompass the needs of both companies," he said. Furthermore, the backstop needs to support an expanded commercial paper program, regardless of the merger, he added. "Hewlett has been in a position with a $1 billion CP to support a larger backup program," Frier noted. He was unable to provide a figure for the planned backstop.

Jim Salonia, former senior v.p. with Phoenix Investment Counsel, has switched to ING Aeltus Group to head up its marketing, business management, sales support and client service for institutional sales. He will again be a senior v.p. Salonia now reports to Duke Meythaler, head of the distribution platform at ING Aeltus capital management. He used to report to Tom Meyers, senior v.p. and head of institutional sales, at Phoenix Investment Partners in Indianapolis. Phoenix Investment Counsel is a fully owned subsidiary of Phoenix Investment Partners. Salonia says he replaces Arnold West at ING Aeltus, and that West remains with ING as a v.p. in institutional sales.

Buy-side analysts and portfolio managers say there are a number of bargains in the energy and utilities sectors, as panic sellers seek to avoid holding the next Enron, while others are forced to sell bonds as soon as they drop below investment-grade.

Credit Suisse First Boston and J.P. Morgan closed last Thursday the re-jigged bank deal for Collins & Aikman with a reverse flex and an altered "B" term loan. The deal was originally scuppered in the wake of Sept. 11 due to market conditions, and when it returned pricing was bumped up 3/4% on the "B" at launch three weeks ago, despite lower leverage numbers (LMW, 12/8). But after a successful bond offering, the size of the bank deal was trimmed down and a reverse flex was executed on the reduced tranche, commented one banker. Another banker said the "B" finished at $300 million with a LIBOR plus 4% spread--the original pricing on the deal. The four-year revolver is now $175 million and the term loan "A" is $100 million.