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Nelson Capital Management plans to swap 5% of the firm's $120 million portfolio into corporates from agencies but wants to see better corporate earnings reports over the next few weeks before making the move, according to Palo Alto, Calif.-based portfolio manager Brian Roberts. The move is predicated on the view that the economy is improving and corporate bonds will outperform agencies.

This chart, provided by Citibank/Salomon Smith Barney Inc., tracks bid-ask prices for par credit facilities that trade in the secondary market. It also tracks facility amounts, ratings, pricing and maturities

The Texas Permanent School Fund is planning to add up to 2-3% of its portfolio, or $140-210 million, to corporate bonds over the next two or three months in a bid to add yield. Carlos Veintemillas, portfolio manager overseeing some $7 billion of taxable fixed-income in Austin, says he is looking at short duration single- and double-A credits. To finance the purchases, the fund will use the proceeds from prepayments in its mortgage-backed securities portfolio, and new cash from royalties the fund receives for oil and gas fields on public lands. Veintemillas says he is waiting for evidence of increased capital expenditures by companies before making the move.

The Catholic University of America has made its first foray into distressed debt, investing $4 million in the asset class, according to Ralph Beaudoin, v.p. of finance and treasurer. The roughly $130 million endowment decided to enter the distressed arena because the asset class is performing well at a time when few other investments are, Beaudoin said, emphasizing the counter-cyclical nature of distressed debt. "Distressed is having its day in the sun," he added.

Levels for Venture Holdings' bank debt have been dropping since the company announced that the German courts had commenced insolvency proceedings against its German subsidiary Peguform. But the paper slipped further--into the low-60s--this week after Moody's Investors Service downgraded the company's credit facility to Caa1 from B2. According to the Moody's report, the company is now in default under its U.S. credit facility and acceleration of its debt maturities is possible.

Levels for Buhrmann's bank debt have been put under pressure since the company announced that it is withdrawing its prior earnings forecast due to the uncertain economic climate. The market for the company's term loan "B" has slumped about one point to the 97-98 range, although traders said no paper had changed hands. The company's U.S. revolver was quoted in the 90-92 range.

Salomon Smith Barney has combined its U.S. high-yield and high-grade credit trading businesses in an attempt to better allocate its resources to "crossover" credits--a booming area of the market consisting of bonds that are bought and sold by both high-grade and high-yield accounts. "We don't worry about where the bond trades, just that we have the best traders trading it," says Jim Zelter, head of the firm's global high-yield business, explaining the rationale for the new structure. Though other large dealers, including Morgan Stanley (BW, 8/19/01) and Merrill Lynch (BW, 1/13/01) have united high-yield and high-grade research, and Goldman Sachs has united its capital markets units, Salomon is believed to be the first large dealer firm to fully combine high-yield and high-grade credit trading.

A combination of lender fatigue and regulatory pressures has increased the supply of distressed bank debt available to hungry investors in the secondary loan market. "What we're seeing is a real opportunity for a distressed investor that will take the time to affect the turnaround and reap the rewards [because] the bank group is not necessarily ready to do so," said Lance Miller, director at Glass & Associates.

* If conference attendance is any way to measure the growth of a market, then the distressed debt market is on fire. This latest conference brought in so many attendees that delegates had to sit on the couches and chairs that lined the walls of the designated conference space.

Caja de Ahorros de Valencia, Castellón y Alicante (Bancaja) will come to market with a E1 billion residential mortgage-backed securitization, set to launch later this month. The bank has mandated Dresdner Kleinwort Wasserstein as sole lead manager, according to London-based bankers. The deal will be Bancaja's second RMBS transaction this year (BW, 8/4). In an interesting twist, market players say the last deal was sold to a single investor and as such, the upcoming deal is going to be the first time investors have access to Bancaja RMBS paper. Bancaja is Spain's seventh largest bank.

Standard & Poor's is looking for two senior collateralized debt analysts for its recently created CDO manager focus group, according to group head, Mark Gaw, associate director in New York. Both positions are newly created. The positions are for the associate director level--a senior title at S&P--and both analysts would report directly to Gaw. Created earlier this year, the manager focus group is part of S&P's structured finance division, although it closely works with the investment services group of the rating agency, headed by Joel Friedman. The group provides more visibility in the CDO market by releasing reports on CDO collateral managers' performance relative to their peers, at least for those willing to get the exposure. Gaw says he routinely talks to managers who refuse to be profiled. The group, he adds, has already evaluated 16 collateral managers, including firms such as BlackRock Financial Management, Deerfield Capital Management, PIMCO and American Express Asset Management. He plans to profile 10 more asset managers within the next few months.

A $200 million add-on credit for Genesis Health Ventures has been re-priced after Standard & Poor's weighed in with a B+ rating, one notch lower than the Ba3 opinion offered byMoody's Investors Service. "S&P is a little misinformed and took a different view to the collateral package than Moody's," one banker said. The $200 million add-on to the existing "B" piece was priced at LIBOR plus 31/ 2%, but it has been flexed upward to LIBOR plus 33/ 4% to reflect the rating, he noted, adding that the loan also is being offered with a 50 basis point discount. Bankers at First Union and Goldman Sachs, which are leading the credit, either declined to comment or did not return calls. A spokeswoman for Genesis Health also did not return calls.