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Rabobank International, a high-profile collateralized debt obligation manager, has added E.A. Kratzman as executive director to head a new collateralized loan obligation effort, according to sister publication BondWeek. Kratzman reports to Sheldon Sussman, managing director and head of capital markets. Sussman said the position was created to support the bank's expansion into the CLO business, which he sees as a "logical and natural extension of Rabobank's already considerable presence as a CDO manager."

Kansas City Southern recently reduced its existing credit facility in an effort to decrease the company's exposure to floating interest rates, according to Paul Weyandt, treasurer. "We cannot justify being a railroad company and having over 50% floating-rate debt," Weyandt said, noting that most of the company's assets are long lived. The company replaced the bank debt with seven-year notes, so its interest-rate expense will increase. But the increased cost is worth it for the company, which removed some interest-rate risk from its income statement, he explained.

Salomon Smith Barney last week had to flex pricing upwards for two credits debuting in the institutional market. The buyside demanded flexes on Moore Corp. and Giant Eagle, citing a lack of familiarity with the names. Moore, a commercial printeing company, launched the refinancing of two facilities totaling $400 million last week, but investors refused to bite at LIBOR plus 21/ 4%. As a result, pricing has been flexed upwards 25 basis points on the six-year, $200 million "B" piece. Investors looking at Giant Eagle, which is co-led with Mellon Bank, were pushing for a 1/2% flex on the $550 million term loan, but they had to make do with a 1/4% boost to 21/ 2% over LIBOR.

US Bancorp Piper Jaffray Asset Management has hired Tony Rodriguez to oversee its $30 billion fixed-income portfolio. Rodriguez left the New York offices of Credit Suisse Asset Management (CSAM) last Friday, where he oversaw the firm's $5-6 billion in corporate bond assets. He will take charge of US Bancorp's 40-50 person Minneapolis-based team later this month. Rodriguez's former boss,Gregg Diliberto also resigned last week from his position as managing director and head of CSAM's core fixed-income assets. He is taking a senior fixed-income position within a $160 billion largely proprietary portfolio at Citigroup Global Investments. His hiring is not related to the departure of a team of portfolio managers from Citigroup Asset Management (see story, page 2.)

The incredibly shrinking spreads on new issue loans that have haunted investors like a B-grade movie for the better part of the last year are finally fattening up, thanks to horror stories playing out in other markets. Jitters in the equity markets over accounting scandals, a slackening of demand from retail funds and institutional buyers and three straight weeks of bond outflows have caused secondary pricing in the loan market to soften. Spreads over LIBOR are starting to follow suit and are getting bigger. "You've seen in the last 10 days the market has changed," said Art Zimmer, senior v.p. and portfolio manager at OppenheimerFunds. "Refinancings at lower spreads and new deals getting flexed down are not going to continue. People are putting their foot down." Zimmer cited a slackening demand from retail funds and institutional buyers as the reason behind the sea change.

The exceptionally low primary market volume this week resulted from a combination of summer doldrums, post July 4 hangover and the ongoing market dislocation as the equity meltdown continues. Examples of cancelled deals are growing, such as Merck's decision this week not to proceed with the planned bond sale for Medco on the back of the postponement of the IPO. With risk appetite minimal at best and non-existent for any company that is under an accounting cloud, primary market conditions are not conducive to placing the kind of deals that always took more legwork even at the best of times. Exemplary borrowers such as Wal-Mart however, are having little trouble with market access with WMT able to price $1 billion of 5-years at +50 this week. Total investment grade issuance for the week was just under $4 billion, making it one of the slowest weeks of the year.

The market for cash flow collateralized debt obligations will be hit hard by the WorldCom accounting debacle, market players say. One CDO collateral manager notes that cash flow CDOs have much more exposure to WorldCom than they do to Enron, the previous corporate fiasco, which had a minimal effect on the cash flow CDO market. The manager predicts that investment-grade CDOs with exposure to WorldCom will be severely downgraded, making the CDO corporate market more volatile as a whole. He reasons that with so many corporate CDOs backed by WorldCom debt, downgrades in the collateral will put added pressure on the CDO notes, contributing to a worsening in investor confidence in the CDO market.

High-yield hung in relatively well through Thursday of last week considering the carnage on the equity side.New issuance included a $305 million Goldman Sachs-led deal for Oregon Steel Mills. Though Qwest Communications' bonds took a beating, traders and salespeople believe at least 30% remains in high-grade accounts.

J.P. Morgan held a bank meeting last Wednesday for existing lenders and some prospective new lenders to shop a lower-priced refinancing for Domino's. The pizza delivery company is looking to take advantage of a recent upgrade by Moody's Investors Service, which was prompted by improved performance, and more favorable market conditions, said a banker familiar with the deal. The $474 million bank facility was upgraded from B1 to Ba3, while $256 million of 103/ 8% senior sub notes jumped to B2 from B3. Company officials and a spokesman for J.P Morgan declined to comment.

The banks holding XO Communications' bank debt are not yet ready to take up Carl Icahn on his offer to buy $331 million of the senior secured paper at 40, as lenders hold out hope that they can continue to fend him off and realize a better recovery with their own plan. "People think the company has a higher value," said one dealer, noting that selling to Icahn caps out the recovery value at 40. But not everyone is so sure, and there was some speculation that, if one bank cracks, there would be a rush to unload rather than be left holding the paper.

Bank debt of Level 3 Communications jumped some 10 points to the 68-70 level after the announcement that the company would raise $500 million in new capital from Longleaf Partners Funds, Berkshire Hathaway and Legg Mason. Before July 4, investors could have bought the paper in the high 50s, one dealer said, noting that more than $20 million had changed hands after the announcement early last week. Investors perceived the move as a sign of positive support for the beleaguered telecom industry.