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Manufacturers' Services Limited (MSL) has sealed a three-year, $100 million revolver and a $10.5 million term loan with lower interest costs, after slimming down its balance sheet and switching from a cash-flow deal to an asset-based facility. "The catalyst to the refinancing was that the old facilities were making less sense as MSL downsized its balance sheet," said Sean Lannan, treasurer. "The old facility was too large and inflexible in terms of international requirements."

WorldCom's bank debt lost its premium over the company's bonds last week after it announced that more accounting errors are likely to be uncovered. The market for the bank debt was quoted at a five-point premium to WorldCom's bonds because investors were hopeful that the bank group would strike a deal with the company to put their investment in a position senior to the bonds (LMW, 7/1). The bank debt is pari passu with the bonds, and the company's May 2003 notes were quoted in the 13-15 range, down from 16 1/2-17 the previous week. Traders said the market opened with an absurdly high bid of 20 for the company's $2.65 billion credit facility last Tuesday.

Weiss, Peck & Greer--the U.S. investment arm of Holland's largest asset manager, The Robeco Group--is prepping its second collateralized debt obligation, according to sister publication BondWeek. Called Robeco CDO V, the deal will be backed by high-yield bonds and loans. The arranger for the deal, Rabobank, currently is marketing the equity and the lower-rated debt tranches. The deal should be priced early next month, a CDO market official noted. Calls to Weiss, Peck & Greer and Rabobank were not returned.

Veridian has secured a $200 million credit facility as the last step toward a balance sheet restructuring. James Allen, cfo, said it was necessary to refinance the company's bank debt because many of the terms in the senior credit agreement had to change because of the restructuring. The Arlington, Va., information technology company, which serves the defense industry, now has a single layer of low-cost senior debt and a provision for up to $50 million that can be used for future acquisitions without bank approval, Allen noted, commenting on the advantages of the new facility.

In a holiday-shortened quiet week it was no surprise that investment grade issuance only totaled $3 billion bringing the YTD total to $282 billion. $1 billion worth of high yield deals were also priced. The illiquid conditions evident during the week also impacted the 4-week moving average deal size which has now dropped below $350 million, a low for 2002. Average credit quality is also slipping from the much higher levels seen earlier in the year and is now solidly at the BBB level.

The bank debt of Encompass Services was lowered from B1 to B2 as Moody's Investors Service fears that deterioration in non-residential construction, which has already damaged profitability, will put a strain on the company's covenant compliance efforts. The credit facility comprises a $300 million revolver, a $130 million "A" term loan and a $170 million "B" term loan.

Credit Suisse First Boston last week snared Robert Franz, v.p. and par trader at Morgan Stanley, adding a seasoned trader to a stocked bench in an effort to beef up its market coverage. The firm, one of the powerhouses in the loan trading market, is expanding its group because of an increase in the volume of trading among banks and institutions. Franz will be a director and senior trader working with par and stressed loans. A rival dealer noted CSFB is bucking the trend in the loan trading market. "They seem to be moving in the opposite direction of other banks, which are holding tight or scaling down," he said.

Deerfield Capital Management is raising up to $150 million for a distressed fund that will allocate 80% of its capital to high-yield bonds and syndicated bank loans. "Bond defaults are at a 10-year high, and last year distressed loan trading stood at $41.8 billion," saidJohn Brinckerhoff, director of marketing, on the timing of the fund. "The growth in the market has outpaced the capital allocated to the asset class." Additionally, distressed debt does better in an economic recovery, he noted.

Robert Lefkowitz has left Delaware Investment Advisers in Philadelphia, where he was a high-grade trader, to join Deutsche Asset Management in New York as a high-grade industrials trader and v.p. sector manager. Lefkowitz says he made the move because he wanted to return to New York where he grew up and started his career. He will report to John Ryan, managing director. Ryan did not return calls. Ryan Brist, who manages Delaware Investment Advisers' core and core plus institutional assets, declined comment about his plans regarding a possible replacement for Lefkowitz.

Two distressed securities analysts have widely different views of the worth of WorldCom's holding company bonds, all of which were trading at 13.5 cents on the dollar last Tuesday morning. Matt Breckenridge, an analyst at DebtTraders, which holds a proprietary position in WorldCom, believes the bonds are worth far more. He says he would begin selling the bonds in the 40s or 50s, a level he believes the bonds will reach as investors gain a better understanding of what the company's future EBITDA will be. He says the bonds trade at approximately one times EBITDA, and adds "You can buy any company's bonds at one times EBITDA and make money." He estimates the value of the company at four times EBITDA, arguing that it will not decline rapidly because it has a number of customers locked into long-term contracts. Breckenridge says the industry consultants with whom he has spoken are largely advising their clients to continue using WorldCom's services, though some are advising clients not to sign any new contracts. Breckenridge would not disclose the size of DebtTraders' position in WorldCom.

FleetBoston Financial and Bank of America are in the market with a $475 million refinancing package, split between $300 million of bank debt and $175 million of senior subordinated notes, for Casella Waste Systems. The recent softening of Allied Waste in the secondary loan market should not impact syndication of the new facility, as Casella is a regional waste services company with separate issues, one buysider noted. In addition, the bank refinancing is being done with existing lenders, who are supportive of the credit, the buysider said. Calls to Richard Norris, cfo of Casella, and officials at the banks were not returned.