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ING Investment Management will release 11 members of its Hartford, Conn.-based subsidiary, ING Aeltus Investment Management, as it shifts $13 billion in fixed-income assets to its portfolio management team based in Atlanta. Tracy Sherman, an ING spokeswoman, says the decision was partly due to the superior performance of the Atlanta team, led by James Kauffmann, and also part of a broader decision-making process begun in mid-year about how to make the best use of the company's fixed-income resources. The mortgage-backed and quantitative groups will stay in Hartford, overseeing some $5 billion in assets.

Citibank andPNC Bank have advised Massey Energy to hold off on a new $525 million credit facility until market conditions improve. "We were advised by our lead banks that it might be a tough sell in the marketplace," said Katharine Kenny, director of investor relations. "We can't disagree that the markets are pretty tough." Operational improvements in the third quarter further alleviated the company's immediate need for the proposed $275 million "B" term loan, one banker noted. "We feel like we have sufficient liquidity given our current internal operations," Kenny concurred, adding that Massey can afford to wait on the deal. Indeed, the coal producer's improved cost structure in the third quarter yielded $140.5 million of total liquidity, about $68 million more than in the second quarter.

The Aerostructures Corp., a designer and manufacturer of aerospace structures including wings, fuselage sections and precision-machined components, has a relatively small revenue base, has a significant portion of its revenue tied to a single customer and is dependent on a weak market for commercial aircraft. As a result, Moody's Investors Service has assigned a B1 rating to the company's proposed $165 million senior secured credit facility, which consists of a $35 million revolver and a $130 million "B" term loan.

Conseco announced that it received a forbearance agreement from its lenders last week, but the bank debt continued to languish in the 58-61 range as no trades took place. An undisclosed seller was looking to unload a $30 million piece of Conseco bank debt, but the seller is finding the current levels for the paper to be too low, according to market players. "The buyers are in the high 50s, but the sellers aren't there," one trader said.

Daniel Arbess, head of special situations investing at Triton Partners, says the worst may not yet be over in terms of corporate defaults. He argues that more companies may face a refinancing crunch when senior secured bank debt negotiated in the late 1990s comes up for renewal in the next few years. Martin Fridson, high-yield strategist at Merrill Lynch, disagrees. He says that while leading indicators show that there may be a slight uptick in the default rate for the next few months, he expects a sharp drop in the default rate in 2004 and 2005.

The market value of defaulted bank loans hit an all-time low of 44 for the month of September, setting the table for a feast of upside potential. Edward Altman, Max L. Heine Professor of Finance at New York University, said a look at where distressed debt is now compared to where it usually ends up in terms of recovery bodes well for investors. "Historically, most studies have shown that recovery values for bank debt are roughly 70-80%," said Altman, one of the keynote speakers at the 7th annual Loan Syndications and Trading Association (LSTA) conference in New York. But these historical averages could be misleading in today's environment, and recovery rates may not be as high as they have been in the past, he cautioned.

Encompass Services' bank debt remained stable, albeit in the 31-32 context, after the company announced that it would pursue a pre-packaged bankruptcy plan. The restructuring plan stipulates that $200 million of the company's outstanding $600 million of bank debt will be rolled into a new term loan and the remaining amount will be converted into an 80% equity stake in the reorganized company. One trader estimated that the recovery value of the bank debt could be as low as 35 under this scenario. No trades could be confirmed last week, but one dealer noted that two weeks ago market players were interested in the paper for the value of the equity alone.

An independent analyst and a portfolio manager say last week's spread widening in the bonds of Household International has created an opportunity to add exposure to the credit. J.P. Weaver, portfolio manager of $1 billion in taxable fixed income at McGlinn Capital Management in Wyomissing, Pa., says he will add to the firm's holdings of Household five-year notes if they continue to widen a bit more, though he declined to give the specific level he was looking for. Last Wednesday morning, the 5.75% notes of '07 (A2/A-) widened some 70 basis points to 520 over Treasuries. McGlinn says Household's proposed $484 million settlement of predatory lending issues and stated commitments to increase its capital reserves give him confidence that the finance company will turn things around.

A $50 million piece of Federal-Mogul's bank debt changed hands almost two weeks ago in the 47-49 context, and small pieces of the paper continued to trade in the 48-52 context last week. Comerica is believed to have sold the large piece, while Bank of Tokyo-Mitsubishi was rumored to be unloading some exposure. The recent activity was prompted not only by regulatory pressures but by fears that issues affecting Ford Motor and General Motors could trickle down to car-part producers such as Federal-Mogul, according to sources.

Investment banks with long positions in collateralized debt obligations on their balance sheets are repackaging them and will sell them privately in an effort to minimize exposure to underlying corporate risk. "Every active credit derivatives house is looking to [repackage CDOs for the private market]," says Chris Carman, head of synthetic securitization at Citigroup in London. He says Citigroup has successfully completed a private CDO repackaging.

MONY Capital Management, a subsidiary of the MONY Group, is looking for an asset-backed securities analyst. Bill Sidford, senior managing director and chief ABS portfolio manager, says the new hire will replace an analyst who recently left and will bring the number of ABS analysts to four. The analyst would report to Sidford. He or she would cover various asset classes such as credit card or autos, without any particular specialization. Sidford says he is "hopeful" of filling the position before year-end.