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Unproven turbines could restrict the amount of cash garnered by Citibank and Société Générale for the $1.7 billion non-recourse loan for project sponsor PG&E National Energy Group. The banks are looking for an extra $625 million during retail syndication after commitments of $1.075 billion came in before Christmas. One banker commented on the fat fees on offer, with $75 million receiving 1 1/4 %. Pricing is said to be LIBOR plus 1 3/4 %. "But the Siemen turbines are not 100% proven and this could be a problem," he added. Increasing exposure to the power industry is not assisting either, the banker said. Calls to Chris Beale, head of project finance for Citibank, were not returned.

Winston Hotels replaced its existing $140 million revolving credit line with a $125 million line because it did not need as much money and was looking to save on what it would pay on the unused portion of the loan. Other than its size, the new credit essentially mirrors the old: both are three-year revolvers collateralized by 28 hotel properties with similar covenants, explained Joseph Green, executive v.p. of acquisitions and finance.

Asset-backed finance veteran Andrew Yuder, has joined ING Barings as managing director of the firm's securitization group after leaving Credit Suisse First Boston last month. Yuder will be responsible for securitization origination with a focus on middle markets and less-commoditized asset classes. He reports to John Costa, head of securitization for the Americas at ING. Yuder said his focus will be on securitizing esoteric assets and niche markets including small businesses, equipment leases, and timeshares."I left because I thought there was more opportunity to do middle-market business here than at First Boston," said Yuder.

Metals USA tapped its relationship bank, Bank of America, to lead a $350 million debtor-in-possession financing facility last month after it filed voluntarily for Chapter 11 protection in November. The facility is set to mature in June 2003, allowing for two three-month extensions and it is priced at LIBOR plus 3/4 %. "It allows us to operate in a fairly normal way during the bankruptcy process," said Terry Freeman, v.p., chief accounting officer and treasurer, said of the DIP.

Regal Cinemas emerged from Chapter 11 with a Moody's Investors Service rating of B1 on its $370 million senior secured exit financing after the company eliminated two-thirds of its debt and strengthened its balance sheet. "I think Regal will hopefully do whatever it can to improve its operating performance in order to be able to withstand any short-run or long-term market disturbances," said Russell Solomon, analyst at Moody's.

Buzz in the market last week that Verizon may be interested in acquiring Nextel Communications pushed Nextel's bank debt up to 87 after bids had dropped earlier in the week on a Lehman Brothers report that slapped a sell rating on the company's stock. The $5 billion credit, which started the week at 91, had bids as low as 85 on Tuesday after Lehman issued its research report. But confidence grew again by Thursday as traders started buying into the rumblings that Verizon was interested in the company.

Dealers said Owens-Illinois bank debt jumped up to 99 5/8 to par as the market responded to recent news that the company has upsized its planned bond offering to $1 billion. "Don't trade it," cautioned one dealer, noting that a larger bond deal will likely mean more bank debt will be retired at par. The market apparently heeded this sage advice, as movement on the name had frozen by the end of the week. In the past two months, the debt, feeding off of rumors of the 144A private transaction, has crawled up from 93. Adding to that fire, dealers believe the company is expected to pay down at least two-thirds of its current term loan, although Owens-Illinois has made no official promise. A source close to the company said the company has stated its intentions to repay the term loan and also to address its 2004 and 2005 maturities in the next couple of years.

Rabobank, Harris Bank, U.S. Bank and CoBank have signed onto Deutsche Bank's $500 million credit for Kansas City-based Farmland Industries, which hit the market Thursday. A banker commented the asset-based deal has been well received and is expected to wrap up by Jan. 24. The term loan is believed to have already filled out, one official said. The credit, structured as a $350 million revolver priced at LIBOR plus 3 1/2 % and a $150 million amortizing term loan at LIBOR plus 4 1/2 %, refinances an off-balance sheet synthetic lease and a CoBank-led revolver. Fees offered on the revolver are 75 basis points for $25 million and 55 basis points for $15 million.J.P. Morgan led the off-balance sheet lease, said the banker. Deutsche Bank has a strong asset-based group, he noted, suggesting one reason for the lead role. Calls to John Berardi, cfo of Farmland and spokeswoman Sherlyn Manson, were not returned.

Merrill Lynch, looking to jump into the middle-market financing game and expand a new group to fill a void it sees in the market, is gearing up to battle the remaining hardcore players still operating there. Merrill last month hired former Heller Financial veteran Robert Radway as managing director and president of Merrill Lynch Capital, a newly formed commercial finance business. Finova Group made a sharp exit last year andGE Capital swallowed Heller, and now Radway sees the pump primed for a big player looking to serve the market. "Finova, Comdisco and Heller, among others, departed the space, and no one has replaced them," Radway said. "The market consolidated dramatically, and is now underserved."

In an effort to respond to an increasingly competitive CDO equity market, J.P. Morgan is unveiling its High Yield Debt Index 100 to serve as a tool for CDO equity investors to hedge CDO equity positions. Christopher Flanagan, head of CDO research at J.P. Morgan, said the product has been developed out of the firm's high yield trading desk as a way to give CDO investors a way to index and reference the performance of equity on their deals. According to Flanagan, J.P. Morgan is the first bank to present such an index for the market.

Uncertainty surrounding the fate of Kmart and its potential bankruptcy filing created a trading lock in the secondary market as LMW went to press as traders were staring at a laughable 50-75 bid/ask spread. That gaping span capped a wild ride for the bank debt, which started the week at 95-97, slipped on Monday to 85 as the ratings agencies continued to downgrade the name, and dropped even further to 70-75 by Wednesday.

Bank of America and Lehman Brothers have underwritten a $500 million bridge loan for L-3 Communications as part of the financing backing the company's $1.13 billion purchase of Aircraft Integration Systems, a division of Raytheon. Robert LaPenta, president and cfo, said in a conference call to analysts that Raytheon will replace the bridge loan with $1 billion in high-yield bonds and equity once it completes an audit, probably in April. The equity offering will be $400-500 million, stated LaPenta. In addition to available cash, an existing $600 million credit facility led by Lehman and B of A will be used to fund the acquisition. The revolver will be also be paid down through future capital market offerings, he added, declining to elaborate. One banker said the bridge loan is unlikely to be syndicated. Officials at B of A and Lehman did not return calls.