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Moody's Investors Service is placing the ratings for Corrections Corporation of America under review for possible upgrade, due to a proposed refinancing and the improving financial profile of the company. If the Lehman Brothers led-refinancing is successful and the loan covenants remain the same, Moody's anticipates a one-notch upgrade of all its ratings, including the B2 rated senior secured deal. The loan is $695 million and is being accompanied by a $150 million note offering. The loan currently has $789.7 million outstanding and matures on December 31, 2002.

Prudential Capital Group is in the market warehousing assets for its first collateralized debt obligation backed primarily by leveraged loans. The $400 million deal, called Dryden Leveraged Loan CDO 2002, has been executed in response to a favorable funding gap between pricing on liabilities and pricing on loan assets, said an official at Prudential. "We manage other CDO vehicles but this is the first loan transaction," he said, explaining that the firm has been managing loans since the 1980s for its general account and it will use this deal to utilize the asset class for a structured vehicle.

Schroder Investment Management in London has hired Christina Bastin as a European credit research analyst from Commerzbank, where she was a sell side credit analyst. The firm will launch an euro-denominated corporate bond fund and a global corporate bond fund, both domiciled in Luxembourg, in the second quarter, according to Christopher Wyke, fixed income product manager. He declined to elaborate on the fund launches. Schroder is also looking to hire an unspecified number of additional credit analysts during this year. "Schroder built its reputation on corporate analysis and we want to be a leading credit player." He continued, "we see a shift in markets and investors wanting to invest in corporate bonds rather than government bonds." Governments are issuing less debt, which is the opposite of what corporations are doing, he added.

Société Générale last Thursday launched syndication of a $90 million bank deal in Memphis for the National Basketball Association's Memphis Grizzlies. The Grizzlies loan, which consists of a $40 million revolver and a $50 million term loan, joins the Charlotte Hornets' and the National Hockey League's Pittsburgh Penguins deal on the SG roster (LMW, 3/31).

A combination of increased debt and an abnormal operating environment marked Moody's Investors Service's Baa3 assignment of Reader's Digest's pending $850 million senior secured term loan. The new credit facility will be used to fund the $760 million acquisition of Reiman Holding Company and it marks a dramatic increase in debt for the company. Reader's Digest will have $850 million to $900 million in debt after the transaction and a 3 times debt to EBITDA ratio. This compares to historical balance sheet debt of $150 million to $250 million and leverage ratios of less than 1 times debt to EBIDTA, explained Moody's analystGlenn Eckert.

Lehman Brothers launched the $845 million refinancing for Corrections Corporation of America last week, consisting of $695 million in bank debt and $150 million of senior notes. By press time the "B" loan was 60% full, due in part to strong reverse inquiry from investors on the previous deal, a banker stated. Deutsche Bank, UBS Warburg and Société Générale are co-agents on the loan, which has a B+/B1 rating. "It was always expected the bank debt would be refinanced now, as the maturity approaches," said a banker.

Goldman Sachs has lost another par loan player to Morgan Stanley. Michael Weir has left to join Roger Gilbert, Michael Henderlong and Dan Allen who moved from Goldman to Morgan Stanley in February. Weir had been working at Goldman since June 1998. Sources said that Morgan Stanley has been expanding its secondary loan trading business, especially its par operations, following the trend of larger banks looking to build a one-stop-shop for customers. "A year ago if I did business with them, it was only on the distressed side," said one market player, who noted that now the firm has a strong par presence. Officials at Morgan Stanley were unavailable for comment. Calls to Steve Hickey, Goldman head of loan sales and trading, were not returned by press time.

Sumitomo Bank, West LB and Fuji Bank lost out in a game of chicken last week with Nortel Networks, in a showdown that had three banks far down the relationship food chain looking to improve their lot. Nortel was left with only one option when the three used strong-arm tactics by blocking an amendment which required 100% approval to extend the line for a year, said bankers,

Threatened U.S. military action in Iraq and ongoing tensions in Israel could push up oil prices further--as high as $30 per barrel--causing corporate credit spreads to widen. Though oil is not a dominant factor in the European market, slow economic growth and high inflation combined with high oil prices could bring spreads under pressure, says Geraud Charpin, credit strategist at BNP Paribas in London. Good sentiment toward corporate bonds is largely a result of expectations of a sustained recovery that will underpin credit quality and support demand. An oil crisis could jeopardize that recovery, says Charpin. Autos will likely be most affected by high oil prices. "If gas prices at the pump were hiked by 20% or so, these barely profitable companies will be hit," Charpin says of the auto sector.

The European market looks to be following the U.S.' lead, with more issuers opting to phase out short-term commercial paper, replacing it with longer-term straight bond or asset-backed financing, say bankers and analysts. "When business goes bad, or gets tight, a company can't roll over its CP, and when it can't do that, it's out of business," says Steve White, co-head of European ABS at Morgan Stanley in London, of the shift in the market. "You can't fund a long-term business plan with short-term funding," he adds.

Fitch Ratings has hired Charles Kassouf, associate director, as a collateralized debt obligation analyst for its New York office. David Howard, managing director, who heads the CDO group for the rating agency, says Kassouf will cover cash-funded high-yield CDOs. He started last week and reports to Beth Russotto, director, who overseas cash-funded CDOs, market value CDOs and middle-market collateralized loan obligations.