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The market for NorthWestern Corp.'s "B" loan fell from its premium level as the market anticipates a restructuring for the company. The paper had been trading solidly in the 102 range but slumped to the 99100 context last week, following the company's bonds. "The preferreds and the subordinated bonds have really [fallen] off the table," noted one high-yield market player. The bank debt was able to sustain its close-to-par levels because the market believes the debt is well secured. "The secured debt--on a recovery basis--is pretty well covered by the value of the utility assets," noted Hugh Welton, a Fitch Ratings' analyst. NorthWestern completed the $390 million senior secured term loan in February via lead bank Credit Suisse First Boston.

The $200 million credit backed The Carlyle Group's $300 million majority stake acquisition of the CSX Corp. subsidiary. Carlyle has since phased CSX Lines into its new name, Horizon Lines. Horizon Services Group is the company's cargo management and tracking services unit. The Charlotte, N.C.-based company provides domestic ocean liner services and operates in the U.S., Puerto Rico and Guam. A UBS official declined to comment and an ABN banker did not return calls. Christoph Windmer, v.p. of finance and administration and cfo, did not return calls.

Stressed names with bond counterparts have been increasingly volatile as the loan market chases the easing bond market. "Anything that's got a pari [passu] is getting smoked," said one dealer. Traders pointed to loans for Calpine Corp. and Qwest Corp. as examples. "They're basically bonds with a credit agreement," said one trader. Calpine's new second-lien term loan, which is a part of the company's $3.3 billion debt package, slumped into the 88-89 range from the 91-931/2 context. This loan is pari passu with the bonds. Meanwhile, Qwest's new $1.75 million term loan, which has a $500 million fixed-rate piece, dropped about five points two weeks ago this Friday. But market players said the loan recovered to the 94-95 range by the end of last week following a Treasury market rally and the announcement of the deal backing the second phase of the QwestDex transaction.

UBS and Credit Suisse First Boston launched syndication last Tuesday of a $260 million amended and restated credit for vinyl siding and vinyl window product maker Associated Materials, backing the company's acquisition of Gentek Holdings for approximately $118 million in cash. The deal consists of a $70 million revolver and a $190 million "B" piece. The "B" loan is priced at LIBOR plus 3%, which is 50 basis points tighter than the company's existing loan spread, according to a banker who noted that commitments rolled into the deal both before and after the bank meeting.

UBS has priced the notes for Prudential Capital Group's $349 million Dryden 4 collateralized loan obligation. The triple-A notes priced at LIBOR plus 54 basis points and the triple-B tranche priced at LIBOR plus 285 basis points, according to a source. The deal was initially slated to be $300 million.

AES Corp. has rolled the alphabet tranches of a previously restructured credit into a $700 million term loan, taking advantage of the market environment to cinch a cheaper interest rate. "The key benefit [of tapping the loan market at this time] was the liquidity in the market and the lower interest rates," explained Ahmed Pasha, a manager of investor relations for AES. The company also completed a $250 million revolver. Both tranches are priced at LIBOR plus 4%, a sizeable cut from the company's former facility, which carried a spread of 61/2% over LIBOR across all tranches. Citigroup is the lead on the company's new deal and led the old credit.

Moody's Investors Service has assigned Associated Materials' new debt package the same rating as the company's existing loan, despite the slightly increasing leverage. The company is adding to its term loan by $113.5 million and its revolver by $30 million to back its acquisition of Gentek Holdings for $118 million in cash. Currently, Associated Materials has a $40 million revolver, $76.5 million outstanding on its "B" loan and $165 million of 93/4% senior subordinated notes. With the increased debt for the Gentek transaction, Moody's expects that total leverage will rise to 4.2 times from 3.75 times. But Moody's anticipates that the company will use its free cash flow, which has been solidly positive since 2000, to pay down the bank lines. UBS and Credit Suisse First Boston are shopping the deal (see story, page 3).

Buckeye Technologies was able to get loosened financial covenants for its credit facility agreement through the end of the deal's term in response to economic conditions that prevented the company from meeting the deal's original terms, explained Gayle Powelson, senior v.p. and cfo. Covenants related to debt-to-EBITDA and other performance targets were softened so that the Memphis, Tenn.-based company could be in compliance with the credit agreement, she said. Pricing on the $215 million revolver did not change, Powelson noted, stating that the spread is based on a grid tied to leverage, presently set at LIBOR plus 33/4%. The manufacturer and marketer of specialty cellulose and absorbent products has $207.5 million drawn on the facility as of June 30.

Citigroup has priced the notes for a TCW collateralized loan obligation that is comprised entirely of pro rata loans. The $500 million TCW Pro Rata I will synthetically invest in an actively managed reference portfolio of 75-100 revolver and "A" term loans. The deal is said to be the first of its type to exclusively invest in the pro rata, which has in recent years been shunned by banks and institutional investors due to poor returns and the complication of funding revolvers (LMW, 2/3).

Duane Reade has completed its first ever asset-based credit facility for $200 million. The largest drug-store chain in the New York metropolitan area decided to switch from a cash-flow deal to an asset-based structure in order to gain more flexibility and better pricing, said John Henry, senior v.p. and cfo. Henry said the company considered both cash-flow and asset-based alternatives early on in the refinancing process, but found the cash-flow rates and syndication requirements less appealing this time around. "[The new credit was] easier to syndicate because there are fewer banks involved," he added.

Energy names weakened in the secondary loan market last week under pressure from Calpine Corp.'s new $750 million CCFC1 credit. AES Corp.'s recently completed deal traded off into the 983/4 991/2 context and Allegheny Energy's second-lien loan traded down into the 92- 94 range from the 95-96 context where it was moving last month. "The market ran way too far ahead of itself," noted one trader

Federal bank regulators are preparing to set banks straight on the issue of linking commercial loans to investment-banking business, or loan tying. There is a growing conviction at the Federal Reserve and the Office of the Comptroller that guidance to the nation's biggest banks is needed, a Fed spokesman confirmed last week, and it is now a question of how quickly it will happen. The core issue is just what Section 106 of the Bank Holding Company Act will let banks do. Outside sources were predicting that the guidance will hone in on where that line is to be drawn in future. The banks point out that at present, Section 106 does not ban tying if it is voluntarily entered into. And they argue the law says only if banks exact some "condition or requirement" for getting the loan (beyond routine banking services such as deposits) is tying illegal.