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J.P. Morgan and Credit Suisse First Boston launched syndication of a $1.5 billion asset-based refinancing for J.C. Penney & Co. last Tuesday, pitching yet another asset-based deal into the market. Pricing on the three-year BBB-/Ba2 credit is LIBOR plus 13/ 4%, while there is a 1/2% commitment fee. The credit refinances a $1.5 billion unsecured revolver. Asset-based lending has seen a huge rise in the last year as banks seek more security and cash-flow projections remain uncertain, said one banker. Investors also need to put cash to work and there has been a shortage of leveraged loan deals.

Lehman Brothers' $495 million six-year "B" loan for Corrections Corporation of America has already been twice oversubscribed, with commitment offers still coming in at press time. Strong reverse inquiry from incumbent investors helped the deal get off to a rapid start, said one banker. The total refinancing package is $845 million, comprising $695 million in bank debt and $150 million in senior notes. Deutsche Bank, UBS Warburg and Société Générale are co-agents on the loan, which carries a B+/B1 rating.

As it breaks into the secondary market after an extended stay in syndication, the $1.2 billion JohnsonDiversey credit has been assigned a Ba3 rating by Moody's Investors Service and a BB rating by Fitch Ratings. Led by Goldman Sachs and Citibank, the credit backs the acquisition of Unilever's commercial cleaning business by S.C. Johnson Commercial Markets. The combined company will have to carry leverage of between 5.5 to 6 times as well as dealing with a substantial scope of integration risk, according to Russell Gorman, v.p., senior analyst at Moody's. The new management will need to combine teams in fifty plus countries, and integrate a $1.5 billion acquired company with a $1 billion purchasing company, he added. "This is not a snap-on acquisition," he said. Heavy spending rates in research and development will further constrain the ratings.

Loews Cineplex Entertainment's second lien loan is getting extra attention from investors with small pieces trading in the 97-97 1/4 range as market buzz suggests the company might look for new financing. "A lot of people think that there might be an IPO or bond deal," one trader said. The name is trading off of pure rumors that the company is going to do a bond deal to make a more complete capital structure, said another. Conversely, one banker denied the rumor, stating, "They can't get cheaper financing." Angelo Gordon and Bank of New York are two investors believed to hold positions in the name. The name last traded in the 95-96 range three weeks ago.

Pacific Gas & Electric has been sparking the market with at least $10 million changing hands last week in the 107-108 range after California Public Utilities Commission proposed an alternative reorganization plan last Monday. Dealers explained the plans proposed by the company and by the state regulators both offer bank investors 100% return on principle plus 8% interest. "People think it's a bulletproof piece of paper," one trader said. The name is reported to have been active in the secondary market over the last month.

Fitch Ratings has downgraded the MINCS-PILGRIM 1 synthetic collateralized loan obligation in response to pressure on the loans within the deal's underlying reference portfolio. Jim Barry, analyst at Fitch, said the rating downgrade reflects defaults totaling over $41 million.

High-yield portfolio managers have conflicting views on whether the recent resurgence of smaller high-yield issues in the primary market is a good thing. Michael Collins, high-yield portfolio manager at Prudential Financial, worries that small deals are illiquid, and require more time from the firm's own analysts to understand than they bring in returns. He points to the recent $150 million 9.75% notes of '12 by Alltrista, a home canning equipment company, as an example of a deal that can be a drain on analytical resources: "You don't follow the sale of home canning equipment as part of your regular job." Collins says he cannot rule out small deals, but feels more comfortable investing in fallen angels, particularly Tyco International and Qwest Communications, because they are well-covered and have stable underlying cash flows. He says Prudential has been "in and out" of these names, but would not give details.

UBS Warburg and Morgan Stanley's $375 million "B" loan for RailAmerica blew out last Wednesday, the day it hit the market, as the company tapped the market during a sweet spot for issuers. "The market is on fire right now," said one banker. RailAmerica knew this was the case and came to market specifically with the purpose of cutting pricing, he added. The "B" used to be LIBOR plus 31/ 4%, but is now LIBOR plus 23/ 4%, he commented. The six-year $100 million revolver, priced at LIBOR plus 21/ 4% and is still chugging along, he said. The names of the banks interested in the revolver could not be ascertained.

WESCO International's recently refinanced revolver offers the company greater operational flexibility in its covenants and new long-term financing. The company was able to negotiate more flexible covenants because the new $290 million, five-year revolver is asset-based. "We were looking for longer maturity, increased liquidity, and we wanted to be able to take advantage of the assets that we have, said Dan Brailer, treasurer and secretary for WESCO, adding, "We could do that at essentially the same price. It made a lot of sense." Brailer would not disclose the exact pricing, but said it is comparable to the old.

XO Communications' bank debt shot up 10 points to the 68-70 range last week after its bank group agreed not to press default measures agreed upon in a December 2001 forbearance agreement. Dealers said only small pieces of the paper traded up from the 58-60 range where it had been quoted since the end of March. The forbearance agreement gave the company breathing room until April 15. After that date, lenders could have demanded immediate repayment of the debt and attempted to seize the company's assets. The company is still working with its creditors towards an acceptable balance sheet recapitalization.

The investment grade calendar trickled to just $4.5 billion for the week as the market was still very heavy from the active calendar in March and early April. The pattern of issuance has showed all the signs of late-cycle borrowing, with Yankees (South Africa for $1 billion, Chile for $600 million) accessing the market and the average deal size for the week dropping to just under $350 million, the lowest level since the market turmoil of early February. As is typical of this stage in the borrowing cycle, the high yield calendar has also now heated up, with about 11 junk deals priced for a total new issue volume of $2.5 billion. The weighted average rating for all borrowings for the week was BBB flat, the lowest reading since the onslaught of junk issuance in late 2001.

The investment grade calendar trickled to just $4.5 billion for the week as the market was still very heavy from the active calendar in March and early April. The pattern of issuance has showed all the signs of late-cycle borrowing, with Yankees (South Africa for $1 billion, Chile for $600 million) accessing the market and the average deal size for the week dropping to just under $350 million, the lowest level since the market turmoil of early February. As is typical of this stage in the borrowing cycle, the high yield calendar has also now heated up, with about 11 junk deals priced for a total new issue volume of $2.5 billion. The weighted average rating for all borrowings for the week was BBB flat, the lowest reading since the onslaught of junk issuance in late 2001.