Search results for

Advantus Capital Management has been swapping into investment-grade corporates, and out of Treasuries and pass-throughs, on the view that the market has reached the trough of the credit deterioration cycle, according to portfolio manager Wayne Schmidt.

D.L. Carlson Investment Group is in the process of selling its 10-year agency paper and buying three-year corporates on the view that the Federal Reserve is in an aggressive easing mode and the front end of the yield curve will steepen. Doug Robbins, who manages $200 million for the Concord, N.H.-based firm, declined to discuss specific credits, but says he likes finance and banking paper because it benefits from the Fed's easing policies. He believes that by mid-summer the Fed will cut rates another 100 basis points, bringing the Fed Funds rate to 4-4.5%.

Turner Investment Partners will buy two to five-year paper and sell its eight to 20-year Treasuries, STRIPs, TIPs and 6-6.5% pass-throughs in the third quarter, when it expects the economy to begin improving. Declining to comment on how much of an allocation change he will make, Jim Midanek, who manages $700 million for the firm, concedes "this will happen once the excessive easing expectations come out of the market and the market backs up across the board."

The Warnaco Group's bank debt traded at 43 last week, with market watchers attributing the levels to disappointing retail sales over the holidays. Levels are up slightly from 42, and dealers noted that stock levels and the bank debt are out of sync. Dealers say they're uncertain as to why. "The stock is way too high for the debt -- $1.50 to $4--so something is wrong," one market player observed. "Either the bank debt is too cheap or the equity is overvalued." Warnaco, based in New York City, markets bras to discount and department stores. William Finkelstein, cfo, would not comment.

Arrow Electronics this month signed two new credits, replacing smaller deals that were about to expire. The company closed a $625 million, 364-day facility and a $625 million, three-year facility and Robert Klatell, executive v.p., and Ira Birns, treasurer, say the new facilities are slightly larger than the previous ones to accommodate the company's growth. Revenue was $9.3 billion in 1999 and $12.9 billion in 2000. "This is to fund organic growth. We have made acquisitions, but that's really not an imperative with these facilities," said Klatell.

Anticipation of weak earnings nudged down levels of Emmis Communications' bank debt early last week to 99 3/8, but the paper rebounded back to 100 3/8 when the numbers were released. Pieces of $5-10 million were reportedly traded as the paper moved down. He said Emmis is viewed as an attractive credit because of the protection to shareholders. "Most investors view Emmis as having moderate senior leverage and as a result [think they] should be well protected," one dealer said. The identity of buyers and sellers could not be determined by press time.

Howard Goldberg, an Institutional Investor ranked high-yield analyst at J.P. Morgan, has recently joined US Bancorp's Libra Investments as a high-yield generalist. He left J.P. Morgan soon after it consummated its merger with Chase Manhattan. Goldberg, who has been on the junk sell-side since 1985, and who worked at Goldman Sachs prior to joining Morgan, will broaden his coverage away from retailers and supermarkets, and into consumer products, gaming/lodging and several other fields. He notes that at a full service boutique like Libra, "everybody does a little bit of everything, and my coverage will reflect that." He will report to Randy Masel, one of the firm's directors since, given the relatively small size of the firm's research effort, no one holds the title of research chief.

A whopping $300 million in Finova Group bank debt traded last week and levels climbed about 10 points as the market jumped all over news that Berkshire Hathaway and Leucadia National Corp stepped up with a bailout bid for the company. Activity was so heated that even some par desks were chattering about it, but euphoria died down a bit by the end of the week as traders noted there were still some big issues to be ironed out. Bids dropped back from 87 to 80. Bear Stearns, Credit Suisse First Boston, Deutsche Bank, and J.P. Morgan Chase were said to be the shops most actively trading the name. Calls to Bruno Marszowski, cfo of Finova, were not returned.

Merrill Lynch and First Union are scheduled to launch this week general syndication of their $800 million credit for Winn-Dixie Stores. A banker said pricing bumped up roughly 25 basis points from its original level resulting in an opening price of LIBOR plus 2 1/2% on the $400 million pro-rata piece. There will be a 37.5 basis points non-use fee on the $200 million, 364-day revolver and a 50 basis points non-use fee on the $200 million five-year revolver. The $400 million term loan will be priced at LIBOR plus 3%. Pricing will be tied to a grid based on the company's credit ratings.

HSBC is ramping up an effort to grow its investment banking business and build a lending and secondary trading business and has hired Greg Meredith, formerly of NationsBank, to lead the charge. Meredith declined to comment on the bank's plans, but sources at HSBC said the search is on for someone to lead the secondary loan trading desk.

Merrill Lynch has revised its forecast for the 2001 junk default rate to 9.2%, bringing it closer to the 9.5% prediction of Moody's Investors Service, which some had considered a radical outlier. "It is just coincidental that the number has come closer to Moody's figure," says Martin Fridson, Merrill Lynch's chief high- yield strategist. "Conditions have worsened--the reality has come in line with Moody's. It isn't that Moody's has finally come into line with reality."

Citigroup, Deutsche Bank, and Bank of Nova Scotia have joined joint leads Bank of America and J.P. Morgan Chase as agents on a $1.7 billion credit for Southfield, MI-based Lear Corporation. Cameron Hitchcock, treasurer, said he is satisfied with general syndication on the loan and he expects it to close on March 21. Hitchcock said the company went with Chase and B of A as the company has longstanding relationships with each bank. "They are ranked number one and two in jumbo syndication," he noted.