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Standard & Poor's downgraded Vlasic Foods International's subordinated debt rating to DD from CC last week after the company announced it had filed for Chapter 11 bankruptcy. Kenneth Drucker, director in the corporate ratings group, said the downgrade was automatic on the heels of the announcement. He said ultimately the problem was the company had too much debt and too little income to offset it. "They weren't able to grow their business fast enough," he said. A spokesman for the Cherry Hill, N.J.-based company did not return calls for comment.

W.R. Grace & Co., a Columbia, Md.-based chemical producer, which is considering reorganizing under the Bankruptcy Code is up for renewal of its bank credit line this May but may have to go another route, said Francine Gilbert, director of investor relations. "We are currently negotiating with our bank. There is a renewal risk because of the asbestos litigation. We will look to other alternative sources, such as foreign banks," Gilbert said.

Xerox Corp.'s paper was quoted up late last week to the 61-62 range, as dealers said the name was riding on the climate of a better market. Dealers were split on whether the name would be getting any play in the near future. One dealer speculated that there would be trades if levels notch up slightly. "If I had to guess, it will trade at 64-65," he said. "The whole market is stronger; it's a go-go name. The bonds and stocks are up." But another trader disagreed, calling Xerox's bank debt "a dead issue" and predicted that there would be no trades even at that elevated level. A spokesman for the company has said the company will not comment bank debt trades.

Goldman Sachs & Co. is in the market with a $205 million, two-year deal for Granite Broadcasting Corporation, a credit the firm reportedly picked up after the company's incumbent leads backed away. A banker close to the deal said the Goldman took the lead after Deutsche Bank and Bank of New York passed on it because the banks had concerns regarding the broadcast company's debt profile. Goldman Sachs declined to comment. Officials at Deutsche Bank and Bank of New York did not return calls. Officials at Granite Broadcasting did not return calls.

Corporate bond players, who have reveled in the good fortune--and spread tightening-- of the energy sector, are now worried that oil companies may use excess cash flows to boost lagging stock prices through stock repurchase programs and increased capital expenditures. Traditionally, bondholders would rather see the companies pay down debt to maximize cash flow. "Equity buybacks hurt bondholders because they just prop up the price of the stocks and do nothing for the value of the company," says Michelle Cunningham, portfolio manager at California State Teachers' Retirement System in Sacramento.

Nextel Communications' bank debt was being quoted down by 1/4 of a point last week as sellers hit the market on a heels of a slow-moving bond deal, traders said. The term loan "D" was quoted at 99 1/2 and the "B/C" at 100 1/4. "There was dumping of a whole bunch of paper," said a trader active in the name. He declined to say who was involved. He noted the "D" paper had since been quoted back up to 99 3/8. "The bond deal didn't go as well as was expected," another dealer said. Another market watcher said the bond deal was perceived to be going slowly, which resulted in some selling off of paper. "It put some pressure on the 'D' paper," he said. Nextel, based in Reston, Va., is a provider of wireless phones, two-way radio dispatch, and paging services. A company spokesman did not return calls for comment.

Hormel, Inc. will tap its existing $425 million bridge facility to finance its proposed acquisition of Turkey Store for $334.4 million. Jody Feragen, treasurer, explained the company set up a $425 million facility for bridge financing purposes back in November 2000 as part of its acquisition plans. Feragen said the company plans to close the acquisition and tap the facility expiring in October by the beginning of March with plans to refinance the debt with a longer-term option. Feragen said the company has not yet decided whether or not to refinance with a bond deal or longer-term bank debt. She said deciding on a refinancing plan is something the company will tackle immediately, but she warned, "Nothing is cast in stone. We still need to get a public debt rating." Feragen would not comment on whether the company will seek bids for new bank debt.

Armstrong Holdings traded up to 36, while a $22 million piece of Owens Corning's revolver traded at 37 last week. The size of the piece of Armstrong Holdings could not be determined by press time. Some dealers said the trades were not specific to the industry, but were on the heels of a better market all around. "Everything in the distressed market is trading up right now," a dealer said. Owens Corning, based in Toledo, Ohio, makes glass containers, labels and beverage containers. Armstrong Holdings, based in Lancaster, Pa., makes interior finishing building materials. A spokesman at Armstrong Holdings declined to comment. A spokesman at Owens Corning did not return calls.

Securities firms, unlike commercial banks, have strong objections to the regulators' final version of their interim rule for merchant banking, issued January 10. Twenty days later the Securities Industry Association wrote to the regulators that the final rule falls far short of providing the "two-way street" envisaged by Gramm-Leach-Bliley to allow investment bankers into commercial banking.

Veteran MBS analyst Evan Firestone has leftMerrill Lynch the firm. Firestone, who had been an MBS analyst for over 17 years, making him one of the Street's longest serving veterans, told the firm he wanted to take time off and possibly do something in the film industry, a field in which he holds a graduate degree. His boss, mortgage research head and U.S. fixed income strategist Ken Hackel, says the parting was amicable and the firm is currently debating whether to hire a replacement or shift someone over to his slot internally. Prior to joining Merrill, Firestone was at Greenwich Capital Markets and First Boston. Calls to Firestone's home were not returned as of press time.

Dineen is a portfolio manager of high-grade bonds at MONY Life Insurance in New York, and one of six managers reporting to Greg Staples, who heads the fixed income group. Dineen helps manage $5 billion in taxable funds that also include asset-backed securities, mortgage-backed securities and Treasuries. A graduate of Pace University in New York, he received his Masters in Business Administrated from Sacred Heart University in Fairfield, Conn. He is a Certified Public Accountant and a Chartered Financial Analyst.

Moody's Investors Service downgraded the senior bank credit facility of UNOVA, Inc. to B2 from B1 in response to expectations that the company will have difficulty finding new financing commitments in light of its continued poor financial performance. The rating outlook for the Woodland Hills, Calif-based automative design and integration company is negative. The company will be looking to pay down its current debt in the near-term, but Moody's believes that a lack of adequate cash flow on hand could present challenges. UNOVA's bank facility was collateralized by domestic inventory, accounts receivables, intangibles, and equipment. A waiver allows the company to borrow up to $245 million under the credit line which has been fully drawn. Moody's insists the company establish a more permanent bank arrangement before January 2001, when the waiver expires as Moody's questions whether or not the company's $100 million in on-hand cash provides adequate liquidity for downside protection in the event that the company is faced with unforeseen set-backs. However, Moody's does note that management changes and programs have been instituted to achieve lower costs and new product rollouts. In addition, Moody's observed that the company continues to explore strategic alternatives for its businesses.