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Reto Koller, portfolio manager with Winterthur Investment Management, will switch from a neutral Treasuries exposure to a barbell strategy in a couple of weeks by moving out of five- to 10-year Treasury allocation and buying into three-month and 30-year Treasuries. The move would involve 10% of the portfolio or $200 million. A barbell strategy increases protection against price depreciation along the intermediate part of the yield curve. Koller reasons that by mid-April, the Treasury curve will flatten ahead of the first Federal Reserve tightening which he anticipates will be in May following signs the economy is growing. He says that the market's anticipation of the Fed move will lead to a flatter yield curve as early as mid-April. Koller says a trigger for his barbell strategy will be when the yield differential between the long bond and the two-year Treasury decreases to 200 basis points. Last Monday, this yield differential was 211 basis points.

Bank of America's $225 million "B" term loan for American Seafoods Group is over two times oversubscribed, while B of A and Credit Suisse First Boston's $800 million DaVita "B" has $1 billion in commitments. A banker said the Seafoods recapitalization is almost complete, with 80% on the pro rata also filled. A meeting was held on March 21 for institutional accounts. The credit consists of a $75 million five-and-a-half-year revolver priced at LIBOR plus 3%, with a 1/2% commitment fee. The $90 million term loan "A" has the same tenor and spread and the "B" is priced at LIBOR plus 31/ 2%. "The original transaction was put in place in January 2000, when Centre Partners Management, members of management and two native Alaskan equity investors purchased the company," explained Scott Perekslis, managing director at Centre Partners (LMW, 3/11).

Aquila Power Services, a newly formed holding company of private-equity firm First Reserve, tapped Deutsche Bank for a $100 million senior secured debt package backing the acquisition of Welding Services and is currently eyeing further acquisitions. "Aquila was founded by First Reserve to capitalize on the growth for services and equipment in the power industries," explained James Bennett, a v.p. at Aquila. "The firm [Aquila] does not have a specific fund devoted to acquisitions, but First Reserve does have over $2.5 billion under management," he added. The acquisition is the second after the acquisition of C&W Fabricators for $60 million, Bennett said, but he declined to name potential targets or a timeframe. Welding Services is a specialty mechanical maintenance contractor.

Flowserve has tapped Bank of America and Credit Suisse First Boston to lead an upcoming acquisition financing deal after landing the Flow Control Division of Invensys for $535 million last week. "Flowserve was involved in an auction for the division last August, but pulled out after Invensys would not accept the bid," noted spokesman Sean Clancey. "We were very firm on valuations. In December Tyco International pulled back from their proposed bid and our chairman [Scott Greer] got a call to re-enter negotiations in late January," he added. Clancey declined to say how much debt would be involved in the acquisition, but said the company will have no higher overall leverage after closing than the current level, as measured by debt to EBITDA. Equity as well as debt will be used to finance the deal which is expected to close within two months, he noted.

Four Corners Capital Management, a new shop run by some familiar names, has entered the market with its debut collateralized loan obligation since the fund's inception in September 2001. Market sources said the firm is ramping up a roughly $400 million deal that will be a cash flow arbitrage structure with leveraged loans as the majority of the collateral on the deal. Michael McAdams, who left ING Capital Advisors to head up the new fund, was unavailable for comment as he was said to be shopping the deal in New York.

Three members of an eight-person team overseeing the $1.8 billion high-yield portfolio of Seneca Capital Management, a San Francisco-based money manager with $14.9 billion in total assets, have resigned. High-yield officials close to the three say they were upset because they felt Gail Seneca, the firm's ceo and cio, was meddling in their investment decisions, causing their performance numbers to slide. Seneca's high-yield team has beaten its benchmark, the Lehman Brothers high-yield index, in every year since 1997, according to gross performance figures posted on the firm's Web site. However, the team underperformed its benchmark in the fourth quarter of last year. First quarter performance figures were not available, and Gail Seneca declined to provide them. Seneca would not comment on why the trio chose to leave, and says she has "no way of calibrating" how much she is involved with the high-yield group.

Three members of an eight-person team overseeing the $1.8 billion high-yield portfolio of Seneca Capital Management, a San Francisco-based money manager with $14.9 billion in total assets, have resigned. High-yield officials close to the three say they were upset because they felt Gail Seneca, the firm's ceo and cio, was meddling in their investment decisions, causing their performance numbers to slide. Seneca's high-yield team has beaten its benchmark, the Lehman Brothers high-yield index, in every year since 1997, according to gross performance figures posted on the firm's Web site. However, the team underperformed its benchmark in the fourth quarter of last year. First quarter performance figures were not available, and Gail Seneca declined to provide them. Seneca would not comment on why the trio chose to leave, and says she has "no way of calibrating" how much she is involved with the high-yield group.

Trading was light in the high-yield market during the holiday-shortened week. Traders expect up to $2 billion in new supply next week, which may have softened bidding in certain sectors, such as chemicals. Here was some notable action:

Hughes Electronics' $600 million add-on has been well received with $20-30 million trading at par to 100 3/8 since the paper broke into the secondary market two weeks ago. One dealer said the paper is believed to have traded as high as 100 1/2. Market players said the name was trading among its original bank group as buyers who were pared back on allocation look to fulfill their original hunger for the name.

About $50 million of Owens-Illinois' revolver moved from dealers to institutions at 97 1/8-97 3/8 up from the 96 1/2-97 1/2 range over the last week on speculation that the company will carve out roughly $500 million of its revolver for a term loan to make the paper more attractive to institutional buyers. This change is expected to come through as an amendment or restatement rather than a refinance and it is expected to occur this month, after the company's first quarter. The move is designed to redistribute exposure to the company by moving paper out of the hands of pro rata lenders and into those of hungry institutional investors without syndicating a restructured deal. The banks holding a lot of the paper are encouraging this move to make the name more liquid in the secondary market.

High-yield portfolio managers and a sell-side investment-grade analyst are divided in their views regarding the bonds of telecommunications equipment maker Solectron Corporation, and one of its chief customers, Nortel Networks.