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Merrill Lynch is recruiting Jack Mann to co-head leveraged finance and revive its high-yield operation according to LMW sister publication BondWeek. Mann is currently manager of a leveraged buyout fund for the Carlyle Group. "No ink has been signed yet, but it's just a matter of paperwork," says one fixed-income official familiar with the situation. "I'm surprised they haven't named him already," says another official who spoke to Mann some 10 days ago. He speculates that the delay may suggest that Mann has had second thoughts about running the group, which has been subject to severe cutbacks and the departure of several senior executives (BW, 12/16/01, 2/11). Mann did not return several calls.

A new Financial Accounting Standards Board proposal to increase the minimum required equity in special purpose entities (SPEs) held by third-party investors may slow the expansion of collateralized debt obligations market, according to BondWeek, an LMW sister publication. In a board meeting last Wednesday, FASB proposed an increase in the minimum required equity from 3% to 10%. The equity is the non-rated, highest yielding and riskiest tranche of the notes in a CDO deal, and typically the toughest to fill.

Laboratory Corp. of America gained cheaper pricing on the company's new $300 million Credit Suisse First Boston-led credit after Standard & Poor's upgraded the company from BBB to BBB+ in January. Pamela Sherry, v.p. of investor relations at the Burlington, N.C.-based company, said the facility fee and spread on the new loans are tied to the company's senior credit rating. Spreads on both the $200 million, three-year revolver and the $100 million, 364-day facility are LIBOR plus 1% with facility fees of 12.5 basis points and 17.5 basis points, respectively. "The upgrade is based off an increased recognition of diagnostic testing in health care," Sherry stated, explaining the growing importance of the field within health care. The sub-sector carries a higher profile, she clarified. "Only 3-4% of health care spending is in diagnostics, but this helps drive 80% of medical decisions," she added. Sherry declined comment on savings resulting from the upgrade.

Qwest Communications International is seeking to negotiate a new longer-term credit line with J.P. Morgan and Bank of America to replace the cp backstop line unexpectedly drawn two weeks ago. Joseph Nacchio, ceo, acknowledged in a conference call to analysts last Friday that the banks want higher interest spreads than they currently offer to Qwest and Robin Szeliga, cfo, added, "They need to earn an appropriate rate of return on their assets." The current $4 billion backup line is priced at LIBOR plus 11/ 8% according to Capital DATA Loanware. Qwest met with lead lenders last week after conducting a series of one-on-one meetings with the syndicate.

The Ratings Fallout From Enron

Sherri Andrews, head of high-yield research, has left BNP Paribas in New York. Rod Dunlap, a senior energy analyst in the high-yield group, who says he was let go from the firm, says Andrews left because she was offered what was essentially a demotion. She would have maintained her coverage of distressed credits, but John Maxwell, gaming analyst, would take over as head of high-yield research, he says. Mark Wisniewski, a firm spokesman, says Andrews left to seek opportunities on the buy-side. He would not comment on why Maxwell replaced Andrews as research head. Andrews could not be reached, and Maxwell did not return calls.

Michael Youngblood, a residential and commercial mortgage-backed securities veteran who headed real estate research at Banc of America Securities, left the firm last week. Reached at his home in Charlotte, N.C., Youngblood says he is evaluating several options, including launching his own firm or joining another, possibly as a sell-side analyst. Youngblood continues that he is going to take several weeks off and evaluate which of the two options seems more feasible. He was a managing director and reported to mortgage group head Pat Augustine.

CIBC World Markets and BNP Paribas have joined Deutsche Bank at the top tier of the $500 million credit for Magnum Hunter Resources. The new credit line partially funds the merger with Prize Energy and also refinances the existing credit lines of both companies (LMW, 2/25). Chris Tong, Magnum's senior v.p. and cfo, explained the banks will be agents, though Deutsche Bank has fully underwritten the loan. Magnum will also issue $250 million of ten-year notes underwritten by Deutsche Bank. Magnum is an independent exploration and development company, involved in the crude oil and natural gas markets.

Moody's Investor Service realeased data last week reviewing statistics regarding downgrades on the different asset classes of collateralized debt obligations with CLOs suffering far less downgrades than their CBO counterparts. Arbitrage cash flow CBOs and synthetic balance sheet CDOs were the hardest hit of all structures, according to the Moody's report while balance sheet CLOs were among the top performers.

Lead arranger and administration agent Credit Suisse First Boston is offering 1/4% commitment fees for the five-year $400 million refinancing for King Pharmaceutical. The deal also carries an out-of-the-box spread of LIBOR plus 1%. Bank of America, J.P. Morgan and UBS Warburg are co-syndication agents for the BB+/Baa3 credit, launched with a bank meeting two weeks ago. The deal is one of a number of credits in the market in the pharmaceutical sector. King is a specialty pharmaceutical company that buys products divested from the mergers of mega-pharmaceutical companies.

Deutsche Bank has flexed pricing 1/2% on the $275 million, six-year term loan "B" for AMF Bowling Worldwide, after feeling the bite of a selective investor crowd. The "B" is now priced at LIBOR plus 41/ 2%. The $75 million revolver is unchanged at LIBOR plus 31/ 2%, said a banker. The credit is an exit financing for AMF, which is emerging with far lower debt levels than when it filed for Chapter 11. Approximately $1.2 billion of debt is being replaced with $450 million of funded debt, including $300 million of the bank debt and $150 million of notes due 2008. The bank debt has a B1 rating from Moody's Investors Service.