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Golf is good...a golf outing last week gave traders a chance to meet as a group. Some pride themselves in their golf swing as if they're Tiger Woods in their downtime. But another said these outings involve more socializing than golfing. "Maybe two percent of the guys that go to this actually golf. The rest just swing at the ball and hope for the best," he said with a laugh.

BPS Associates, a Bloomington, Minn. manager with $800 million in taxable fixed-income under management, is seeking to add 5-10%, or $40-80 million, to its current mortgage-backed security allocation as it receives new money this autumn. Lew Coffey, portfolio manager, explains that because many of the manager's clients are agricultural banks, it regularly receives substantial new money in the autumn when farmers tend to take in most of their revenues. The MBS paper he favors is collateral mortgage obligation tranches, because it allows him to pick up additional yield, because many managers are not prepared to do the work necessary to understand the structure. That said, he prefers fixed- to floating-rate CMOs, because they have fewer variables and are easier to evaluate.

Wyndham International's bank debt dipped to 96 5/8 in a $2 million trade. Dealers say while nothing new has come out on the company, technicals could be what's dragging down the name. Players active in Wyndham could not be ascertained. Dealers say a slowdown in the hotel industry is pushing down levels, but a few say a lingering rumor of an acquisition by Bass Hotels & Resorts should help stabilize levels in the long run. "There are holders with large positions who are looking to reduce their exposure, and no buyers," a trader explained of the falling prices. Wyndham, based in Dallas, Texas, owns and operates 240 hotels. Calls to Rick Smith, cfo, were referred to spokeswoman Darcie Brossart, who could not be reached by press time. Another dealer noted that hotels are taking a hit in the economy. "This is no surprise that it's drifted lower, but nobody is hitting the panic button," he observed. A market player called the latest trade "lowball. I'm not sure why it traded there. It hadn't been moving because so many have the paper," he said. "News of an acquisition is coming out again, and it seems more real. But the market has been so slow [to react]." Last spring the company's debt traded up to 99 1/2 on a buyout rumor involving Bass Hotels & Resorts (LMW, 5/27). Talk of interest in the company pushed up levels. Wyndham has a $1.3 billion deal that breaks down into three tranches. Pricing is LIBOR plus 33/4%. J.P. Morgan is the lead arranger.

Canadian banks are expected to post 10-15% sequential increases in impaired loans across sectors this quarter, compared to a 4% rise in impaired loans from the large U.S. banks, according to a report from Goldman Sachs analyst Heather Wolf. The increase is due to illiquid secondary markets for telecom assets, to which Canadian banks have a greater proportional exposure than U.S. banks. The increase among U.S. banks would have most likely been up to 14% if they had not been able to sell distressed loans from sectors other than telecom into the secondary markets. A banker commented the Canadian banks tried to penetrate the U.S. market through the syndicated loan business and offered lines to the telecom names. Although some Canadian banks, particularly Bank of Nova Scotia, have been able to capitalize on improved liquidity in the secondary market for highly collateralized credits, liquidity has remained tight for credits with few hard assets, especially telecom, according to the report. An official at Royal Bank of Canada, however, said that RBC has a strong emphasis towards investment grade exposure and believes lumping together all the Canadian banks is incorrect. A banker at CIBC World Markets also noted that U.S. banks are in the same position. Spokespersons for RBC, CIBC and Toronto Dominion declined to comment on the analysts' report. Spokespersons for Bank of Nova Scotia and Bank of Montreal did not return calls.

Houston-based Equistar Chemicals has secured an $800 million bank deal and sold an upsized $700 million offering of 144A seven-year notes as it seeks to refinance debt. Pat Quarles, director for investor relations, said the producer of ethylene and petrochemical substances wanted to extend maturities on existing debt and maintain a healthy mix in the capital structure. Equistar has a $1.25 billion credit facility that matures in November next year and has $986 million drawn on it, he noted. He declined to comment on the exact structure of the loan as the deal has not yet fully closed. The five-year revolver, which according to bankers is led by J.P. Morgan and Bank of America and totals $500 million, funds short-term cash needs. Quarles declined to confirm banks on the deal. The six-year $300 million term loan "B" enables flexibility, he explained, noting there are no penalties for pre-payment on a term loan, which occurs on a bond issuance. Credit Suisse First Boston and Salomon Smith Barney led the note offering, which was originally slated at $500 million of seven-year, non-call senior unsecured notes. Originally the term loan was $500 million but was downsized in favor of the notes. Quarles would not comment on reasons for the switch in favor of the notes. J.P. Morgan and B of A led the last credit facility in 1999. Standard & Poor's has assigned a BBB rating to the credit facilities, citing the strength of the collateral package in a default scenario, but also the ongoing deterioration of business conditions in the petrochemical sector. Ratings could be lowered if profitability continues to suffer in an industry hit by elevated natural gas based feedstock and energy costs.

A highly competitive and heavily regulated industry poses tough challenges for Genesis Health Ventures, according to a Moody's Investors Service report rating the company's new $415 million senior secured credit facilities. The credit, which is in syndication, has been assigned a Ba3 rating. Russell Pomerantz, v.p. and senior analyst, factored in the number of nursing homes when considering the rating. "It's a large, highly fragmented industry. There are tons of choices," he said. Genesis, headquartered in Kennett Square, Penn., provides eldercare in the eastern US through a network of Genesis ElderCare skilled nursing and assisted living facilities. Also factored into the rating is the litigious environment of health care in the state of Florida. "Florida's prohibitively expensive for large corporate nursing homes," Pomerantz said. "Lawyers go after the big companies. Some have left the state or sold to smaller companies that don't have deep pockets. In Florida there are no reforms that limit the size of settlements." Pomerantz added that this is a factor that affects all health care companies and he knows of no large settlements against Genesis in recent memory. Bolstering Genesis' position is the company's significant reduction of debt, which happened while the company was in a Chapter 11 reorganization. Genesis is reemerging from bankruptcy with $600 million in debt, compared to $2.5 billion when it filed. "They went on a large acquisition binge in the late 90s, but they're one of the first health care companies to come out of bankruptcy and their balance sheet is in good shape."

A financing package with few strings attached won Credit Suisse First Boston the lead on a $700 million debt package funding Roadway's $475 million acquisition of Arnold Industries. Dawson Cunningham, executive v.p. and cfo of Roadway, said the company had no previous relationship with CSFB, but the firm stood out because "they were very responsive to needs during negotiations." He explained that CSFB had very limited contingencies that would undo the financing. The firm, he said, provided a binding commitment that could only be unwound due to extremely adverse changes, basically in the economy. Material adverse change clauses are common in merger deals, and lenders will invoke them when a deal might get too sticky. He declined to name the other banks considered or that bid for the business. CSFB acted as adviser to Roadway and Morgan Stanley was the adviser to Arnold on the transaction. The financing will include a $200 million revolver, but Roadway and CSFB have not finalized the remaining elements of the financing, Cunningham said. "It will be a mix of three different forms of financing, with the possibility of a bank term loan, corporate bond offering and then possibly an asset-securitization." The revolver will fund working capital needs and the $500 million will go toward acquisition financing. Roadway is waiting for ratings, he explained, though he could not provide a timeframe for a decision or comment on what the likely amounts would be. Officials at CSFB declined to comment. Cunningham predicts that Roadway will receive an investment-grade rating. Roadway has no debt currently, said Cunningham, and has been debt-free since 1996. The acquisition is expected to close by the end of the year pending shareholder approval from Arnold. In the first part of the two-step acquisition, Roadway will pay $21.75 cash for each share of Lebanon, Pa-based Arnold. That part of the deal is valued at about $552 million. After Arnold Industries purchase is completed, Roadway will sell back Arnold's logistics unit back to the division's management team for $105 million.

GE Capital is planning to syndicate a $700 million debtor-in-possession credit line for Ames Department Stores, after the troubled discount retailer filed for Chapter 11 bankruptcy protection. A banker said that the $700 million revolver will be syndicated, though he was unable to provide pricing or a timeframe. GE Capital spokesman John Oliver declined to comment on the loan. Calls to Ames CFO Rolando de Aguiar were referred to a spokeswoman for Ames, who confirmed that GE Capital would be providing a $700 million credit line and Kimco Funding would provide $55 million. The Ames spokeswoman said the company has received interim approval from the bankruptcy court for its $755 million post-petition financing. The interim approval immediately makes available to the company up to $628 million to acquire merchandise, fund daily operations, pay its associates and retire the existing credit agreements. A hearing on the final approval of the financing is set for Sept. 17, 2001.

Stephen Stonberg has joinedJ.P. Morgan Securities as a managing director in London to head up its credit derivatives effort in Europe. He joins from Deutsche Bank in London, where he was head of repackaging and portfolio swaps restructuring. A J.P. Morgan executive in London was uncertain whether this was a new position, or if not, who Stonberg replaced. Stonberg will report to Jonathan Laredo, the head of structured finance for Europe and Asia, and to Bertrand des Pallieres, head of rates marketing. Stonberg resigned from Deutsche Bank three weeks ago, according to a London asset-backed banker. Des Pallieres was on vacation and could not be reached for comment. Laredo did not return calls. J.P. Morgan's spokeswoman in London, Eileen Darko, declined comment.

Level 3 notched down another level when it traded last week at 78-79 last week in a single swap. Dealers continue to fault sector problems on the bank debt's continual slide. Buyers and sellers could not be determined by press time. "There's nothing new [on the credit]; it's all related to telecom problems. The bonds have moved around," said a dealer. Yet there may be a sign of steadying for the credit, as traders added that the levels have stayed within a range for a while. Level 3 is based on Broomfield, Colo., and operates more than 20,000 miles of intercity fiber-optic networks in the U.S. and Europe. Arthur Hodges, spokesman at Level 3, declined to comment. Sureel Choksi, cfo, was traveling and could not be reached for comment. Dealers have named the company as among the most hit by the telecom issues. "The problem with it is the distribution of services is taking too long, which is upsetting customers and affecting the bottom line," noted one. Level 3 has a $675 million deal that was signed in March. J.P. Morgan leads the deal.

United Defense Industries' bank debt traded down to 99 5/8 last week in a $5 million trade, down a meager 1/4 from previous levels. The buyer and seller could not be determined. The company, which has a longstanding business relationship with the U.S. Armed Forces, is considered a safe bet even in a slower economy. "There's consistent demand for the industry, and military spending influences what they do," said a dealer. United Defense, based in Arlington, Va., manufactures combat vehicle training systems. Doug Coffey, spokesman, was unaware of the trading levels, but remarked, "That doesn't really affect us. That's the banks' concern." Buzz Raborn, cfo, declined to comment on trading levels. "We just refinanced, so there's nothing to report right now," he said. The company has an $800 million credit arranged by Deutsche Bank and Lehman Brothers. The deal breaks down into a $200 million revolver and a $500 million term loan "B" and a $100 million term loan "A." This replaces a $725 million credit arranged in 1997 through Lehman, Deutsche Bank and Citicorp.

Finally a summer week. Just $6 billion in debt came to market the week ended August 23, with virtually all of it investment grade issuance. Although it was a generally slow week, there were several notable deals, including the $1 billion 10-year for International Paper. Given the difficulties in the paper cycle, the fact that IP could place $1 billion of debt near the tights of the year indicates the depth of the bid for cyclical BBB paper. A steep yield curve has pushed investors down the credit quality spectrum and out the curve in search of yield. At the same time, the aggressive Fed action (7 cuts in 8 months) has given investors more comfort taking these credit bets.