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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, Berkshire Hathaway and Legg Mason. Last week, 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 earlier this week. Investors perceived the move as a sign of positive support for the beleaguered telecom industry.

WorldCom's bank and bond levels narrowed to the 20-22 level after Qwest Communications International announced that it was the center of a criminal probe. Dealers still maintain that the company's bank debt has not yet changed hands since it plummeted last month, although rumors of trades still continue to circulate around the market. "It's a train wreck if anyone were to trade it down there," one dealer said.

Levels for Qwest Communications International's bank debt fell to a wide 75-80 after the company admitted that the U.S. Attorney's office in Denver was conducting a criminal investigation into the company. The name had been offered at 83 before the announcement, one dealer noted. No trades were reported and another dealer suggested that investors are waiting to see what happens next. A spokesman confirmed the investigation but said the U.S. Attorney's office has not disclosed the scope or the specifics of the probe. He could not comment on the bank debt levels.

Portfolio Partners, a Melbourne-based fund manager with over AUD10 billion (USD5.65 billion) under management, is considering making its first use of credit derivatives to gain exposure to credits it cannot access via the cash market. "If we saw a tremendous opportunity in the default-swap market, we could get the documentation up and running fairly quickly," said John Hopper, senior manager of the AUD4 billion fixed-income portfolio. Portfolio Partners is currently "keeping abreast of developments in the market" and could trade default swaps within six months if investment opportunities arise.

AmeriCredit, a U.S. auto financier with a USD13 billion loan portfolio, is considering entering interest-rate swaps to convert floating-rate obligations into a fixed-rate liability next month, said Kim Pulliam, senior v.p. in Forth Worth, Texas. The company, which has USD800 million in revenue, is planning to securitize its auto loans next month to the tune of roughly USD1-1.5 billion. While the majority of that deal is likely to be issued in fixed-rate, she said the company may also issue several hundred million dollars of floating-rate debt in the deal, depending on investor demand for floating-rate paper. AmeriCredit would then seek to convert that liability into fixed-rate and pay a spread over six-month LIBOR.

Bank of America has hired Robert Webster, director and senior counsel, in a similar position. He will report to Leonie Brown, assistant general counsel in London.

Bear Stearns last week brought aboard Kin Sang Cheung, co-head of equity derivatives structuring and exotics at Lehman Brothers in Tokyo, in a new position as senior managing director and Asia head of equity derivatives trading, according to market officials. "We think he's really talented. To get a guy like him is a pretty good thing," said Lenny Feder, head of trading at Bear Stearns in Tokyo, noting that Cheung has over 15 years of experience in the business. Cheung, who was traveling to New York and could not be reached for comment, now reports to Feder. Feder continued that Cheung has joined in a new senior role and will work alongside Susan Chan, managing director of equity derivatives trading in Tokyo. Feder noted that Cheung was brought aboard to add experience to aid in boosting the firm's presence in equity derivatives in Asia.

Carlsberg Breweries has entered interest-rate swaps to convert a recent EUR500 million (USD494 million) bond offering into floating-rate debt. Lars Cordi, treasury manager in Copenhagen, Denmark, said the coupon on the bond is 5.625%. Carlsberg then entered a swap to convert the offering to floating-rate debt at a spread over six-month Euribor, said Cordi, declining to give the exact spread.

In a stochastic volatility world where the volatility is bound to stay below a certain level, Nicole El Karoui1 has shown that it is possible to delta hedge a convex position, such as a call option, with the Black Scholes model and make sure that the profit and loss from this strategy is almost surely positive. This gives a non-competitive upper replication price.

Last week's departure from Merrill Lynch of Glenn Barnes, European head of structured credit, opens the door for a reunification with his fellow credit "dream team" stars T.J. Lim, former European head of debt, and Kevin Krespi, former head of debt for the Pacific Rim, according to industry sources. The group first came to prominence as the heads of a team at UBS before moving to Dresdner Kleinwort Benson and then Merrill. Now that Barnes, like Lim and Krespi, is without a position, City watchers say the trio could reunite to form a credit "supergroup." Lim, Barnes and Krespi declined comment.

Science Applications International, a Fortune 500 research and engineering company with more than USD6 billion in revenue last year, is considering entering its first interest-rate swap on the back of a recent USD800 million bond issue. The company is reviewing swap transactions with potential counterparties, according to Ron Zollars, spokesman in San Diego.

"If they've got something creative, we're willing to listen."-- Kim Pulliam, senior v.p. at AmeriCredit in Forth Worth, Texas, commenting on the firm's financing policy. For complete story, click here.