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An aggressive acquisition strategy and a weakened economic environment have left Neenah Foundry Company highly leveraged at 7.5 times without the cash flow necessary to service the debt, according to Moody's Investors Service. After violating covenants under its bank debt agreements and missing a $15.8 million interest payment on its senior subordinated debt due in May, the company is in negotiations with creditors to restructure its balance sheet and reduce debt. Neenah's lenders have granted the company a forbearance agreement for the violations until May 31. The credit facility includes a $28.5 million revolver and a $1.6 million term loan "A" due in September, a $112.7 million "B" piece due in Sept. 2005, and a $7.2 million acquisition loan due in June 2005. All the facilities were downgraded from Caa1 to Caa3 by Moody's, except the revolver, which is unrated. J.P. Morgan leads the company's bank debt.

School Specialty has added The Royal Bank of Scotland and Associated Bank to its roster of lenders for a newly refinanced $250 million credit and expects it might conduct available non-loan business with the new banks as it has done with existing lenders. "[RBS and Associated] were active in the Midwest marketplace and we invited them to take a look at the credit," said Mary Kabacinski, executive v.p. and cfo, explaining what prompted the syndicate additions for the Greenville, Wis.-based company.

Allegiance Telecom's bank debt held its ground in the mid-to-high 60s after the company filed for bankruptcy last week. The market for the competitive local-exchange carrier's bank debt has been quoted slightly stronger since the end of last month. "CLECs in general have been better lately," said one trader.

The $170 million "B" loan for Werner Ladder was three times oversubscribed last week, according to market players. Citigroup and J.P. Morgan are shopping the credit. Bankers did not indicate any changes to the LIBOR plus 31/4% price talk for the six-year institutional piece. "The revolver is doing fine," said one banker who would not confirm if it was fully subscribed yet. The five-year, $60 million revolver is priced around LIBOR plus 3%. Proceeds from the credit and from a sale of company stock to Leonard Green & Partners are to refinance the company's existing credit and to help redeem $150 million in common stock (LMW, 5/12). Majority shareholder Investcorp will keep a 51% stake in the company after the recapitalization plans are completed. A Citi official declined to comment, while calls to J.P. Morgan bankers and Larry Friend, Werner's v.p., cfo and treasurer, were not returned.

Calpine Corp.'s term loan "B" moved higher last week as the company came out with its first quarter earnings report and revealed additional details of its announced plan to increase liquidity. The company's "B" piece traded in the 971/8 973/4 range, up from the 961/2 971/4 context, where the paper was quoted two weeks ago. The independent power producer's liquidity position looks better, said one trader. "A company like Calpine is going to be a little bit more sensitive to liquidity," he noted. Recently, the company received $105.5 million from a contract monetization and the restructuring of its interest in Acadia Power Partners.

Citigroup has hired Gordon Paterson to head its investment banking business in non-Japan Asia.

HSBC Asset Management has taken on industry veteran Blair Pickerell as its chief executive.

Japan

Hutchison Whampoa made a clever but controversial return to the dollar bond market on Tuesday when it tapped its $2.5bn 6.5% 2013 global issue for another $1bn, creating the largest non-Japan Asian bond.

The recent fillip in stock prices in Japan may provide sufficient impetus for Nikko Citigroup and Morgan Stanley to launch the long awaited Seiko Epson IPO.

Promina shares climbed 10% on their Australian debut on Monday as demand from foreign fund managers enabled the insurance and fund management group's IPO to defy market sceptics.

Oil companies CNOOC of China and PT Medco Energi of Indonesia made sensational returns to the international bond market this week highlighting investors' enormous appetite for top tier Asian credits.