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Levels on the bank debt of former DSL-provider NorthPoint Communications have surged roughly 50 points over the last month on news of a settlement that could slide $175 million to bank debt holders. Pricing for NorthPoint's $40 million term loan jumped from a bid-ask spread of 60 to 62 to a bid-ask spread of 95 to 96 last month, according to LoanX. The paper continued to climb, jumping above par on Sept. 30 to the 106-108 level, and when LMW went to press it was quoted at 108 to 110. The company filed for Chapter 11 in January 2001 and has since moved into Chapter 7 liquidation.

Pension fund and endowment investment in distressed debt during the third quarter cooled somewhat from the torrid pace of the first six months as funds paused to reevaluate the asset class. Last quarter, there were three completed searches resulting in three mandates, according to Loan Market Week andiisearches.com . By comparison, there were eight completed searches resulting in 13 mandates during the first six months of 2002. Furthermore, three searches were postponed or called off entirely over the past three months. But market players expect the distressed debt market to maintain some steam through the fourth quarter, with four large searches currently in progress.

FMC Corporation is in the market with a $300 million "B" term loan, its first ever trip to the institutional arena. The "B" tranche will combine with a $250 million revolver to complete a $550 million facility, central to the chemical company's refinancing plan announced last month. The combination of capacity and flexibility led FMC to access the institutional market, said Eric Norris, director of investor relations at FMC. The company's plans serve to solidify its liquidity position and pay off debt during a downturn in the chemical industry.

Banc of America Securities has released at least two senior investment-grade salesmen and one trader, according to a high-grade executive at the firm. Tim Gordon, a trader, and Lou Russo, a salesman, were both managing directors in the firm's New York office. Gordon was one of the first traders of crossover credits on Wall Street, and already had offers from four or five firms soon after he was let go, say traders at rival firms. Russo was head of sales at B of A earlier in his career. Butch White, a salesman who was based in Charlotte and who had over 20 years experience, was also let go. One other senior person was released from the high-grade group, according to the executive, who declined to name the person. Gordon, White and Russo could not be reached. Calls to Jim Kelligrew, head of investment-grade fixed-income, were referred to Tara Burke, a spokeswoman, who declined to comment.

Charter Communications' bank debt sunk a couple of points after the company revised projections for its third quarter results downward. Market players said the paper traded in the 87 context immediately following the news, but it has since been moving in small pieces in the 85 1/2-86 1/2 range. The company had projected that it would see revenue growth of 13.7% in the third quarter, but it subsequently changed the outlook to 13%.

The Colorado Fire & Police Pension Association has allocated $7.5 million to distressed debt and will consider additional commitments to the asset class, according toBill Morris, chief investment officer. The roughly $2.1 billion pension plan investments made its first investment in distressed debt in the early 1990s and decided to jump in again because it made sense given the supply available in the current market. "There have been many defaults over the past year or two, and returns are highly correlated to supply," he noted. "When supply is up, returns are up."

The bank debt of Encompass Services traded at 27 last week, down from the 35 level where traders had quoted the paper two weeks ago. The trade comes as the company announced that it has received a waiver to avoid defaulting on its bank debt due to covenant non-compliance. The waiver, which is secured through Oct. 15, was needed after the company maintained an outstanding amount on its revolver past Sept. 30.

Volatility in Crown Cork & Seal's bank debt has been caused by instability in the equity markets, as the uncertainty of whether the company will be able to complete the spinoff of Constar International grows, traders said. While the bank debt traded at the 87 1/4 level last week, one dealer noted that he had traded the paper in the 90 context the week before.

Credit Suisse First Boston, faced with an end of September deadline, pulled its $210 million credit facility backing Francisco Partners' acquisition of Global eXchange Services (GXS) from the market last week and funded the deal itself. "They probably had no choice, if they wanted to keep the business," a banker watching the deal said. CSFB plans to re-market the credit later this year or early next year, depending on market conditions, another banker said, adding that trading the paper off its desk would be too sloppy. Jean-Jacques Charhon, cfo of GXS, and a spokesman for Francisco Partners did not return calls by press time.

Last week's debt exchange by power company AES Corporation could be the tip of the iceberg as other junk issuers facing near-term debt maturities and a difficult primary market are expected to consider similar deals. The high number of fallen angels with complex capital structures has created an opportunity for more creative exchange offers, says Brendan White, portfolio manager at Fort Washington Investment Advisors.

First Union and Goldman Sachs kicked off syndication of an additional $200 million "B" term loan for Genesis Health Ventures at a bank meeting last Wednesday. The add-on credit, which backs the company's acquisition of NCS HealthCare, will be consolidated with Genesis' existing $285 million "B" piece and its existing $80 million delayed-draw term loan to form a new $565 million institutional tranche, according to one banker. The two banks are seeking approval from existing lenders for the changes and are targeting new investors to commit to the incremental portion of the deal. First Union officials declined to comment, and calls to Goldman were not returned.

Fitch Ratings has entered into a long-term consulting agreement with Gifford Fong Associates (GFA) to develop new rating methodologies for credit structured finance and risk management. The partnership comes in response to the waning credit environment of the last 18 months and as Fitch aims to increase its value and recognition in the ratings market, according to Gloria Aviotti, group managing director at Fitch.