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UBS Warburg is working on a proprietary credit derivatives model which will allow end users to create baskets of default swaps to achieve tailored levels of risk over the Internet. Alberto Thomas, director in European structured products in London, said the innovation will allow potential investors to play around with specific credits to determine the expected default rate of the basket based on Moody's Investors Service's methodology. The initiative is customer-driven and comes as there is growing demand for rated default swap baskets, said Thomas.

Northern Rock has entered an interest-rate swap to convert a GBP250 million (USD354 million) fixed-rate bond into a synthetic floating-rate obligation, according to an official in the treasury department in Newcastle, U.K. The building society issued in a fixed-rate as part of its regular funding to generate cash to fit its fixed-rate mortgage portfolios and fixed-rate savings products, he said. However, it is converting the proceeds to floating because it uses three-month LIBOR as a benchmark for risk management.

UFJ Bank, created by the merger last year of Japanese Bank's Sanwa Bank and Tokai Bank, is planning to structure its first yen-denominated synthetic collateralized debt obligations and expects to issue up to USD1.5 billion this year. "I expect this will happen within six months," said Hiroyuki Yoshizawa, credit derivatives trader at UFJ. Synthetic CDOs are more attractive investment vehicles for some investors than credit-default swaps because the former can be structured to avoid mark-to-market accounting, he explained.

John Rusnak, the currency trader under investigation for losing USD750 million in foreign exchange trades at Allfirst, Allied Irish Bank's U.S. subsidiary, wanted to buy a new risk management system for the firm more than a year ago, but was turned down because of budget contraints. David Aaron, director of sales and marketing at DerivaTech, a risk management software vendor in New York, said Rusnak approached DerivaTech more than a year ago because he wanted to replace Allfirst's risk management software.

People phoning a bank helpline were greeted not by the staid tones of a financial adviser but by disco music and a claim that they had found "the best place for men to meet men." The snafu happened when The Halifax, one of Britain's largest lenders, said it had inadvertently issued the number of a gay chatline when it sent out 15,000 letters to members of its share-dealing service. According to Reuters, The Halifax has since written to customers to apologize and to let them know of the right number --for their share-dealings

Stone Ridge Investment Partners is looking to swap out of AOL Time Warner 6.125% notes of '06 (Baa1/BBB+) and into Tyco International as investors in the latter credit have become nervous over Enron-related accounting issues. David Killian, portfolio manager of $175 million in taxable fixed-income, believes the Tyco worries are overdone. Once the firm provides more clarity on its proposed reorganization, Stone Ridge will look to add 1-2% of its portfolio, or $1.75-3.5 million, in Tyco bonds, and possibly WorldCom. The AOL bonds have not widened materially over the last two months, while the Tyco 6.375% notes of '06 have widened some 165 basis points in the last two weeks. Last Tuesday, they were bid at 90.5.

Glasgow, Scotland-based Britannic Asset Management will buy corporate credits when values arise in the market. The firm, which invests primarily in sterling-denominated bonds, has been adding corporates opportunistically to its $8 billion fixed-income portfolio. It recently added Tyco International's euro-denominated '04 and '08 on the back of recent widening and WorldCom's '08 sterling issue when it hit the low 90s earlier in the month. "The bid/offer spreads were pretty poor--as they say: you could drive a horse and carriage through them," says David Roberts, head of credit, of the WorldCom bonds.

Greg Hosbein, portfolio manager with Chicago-based Segall, Bryant & Hamill, is going to swap 5%, or $50 million of the firm's $1 billion portfolio, out of corporates into agency pass-throughs, on the view that mortgage spreads will come in over the next few months. He reasons that pass-throughs will benefit directly from a decline in interest rate volatility as the Federal Reserve is likely to keep rates unchanged, until at least until September. He notes that 30-year Fannie Mae 6.50% bonds were yielding 190 basis points over the Treasury curve last Monday, a level he sees tightening by 10-20 basis points over the next few months.

This chart, provided by Citibank/Salomon Smith Barney Inc., tracks bid-ask prices for par credit facilities that trade in the secondary market. It also tracks facility amounts, ratings, pricing and maturities.

Banc of America Securities has landed a lead role on an upcoming bank deal for Lee Enterprises backing the $694 million acquisition of Howard Publications. "Prior relationship and competitive pricing," handed B of A the lead role, noted Carl Schmidt, v.p., cfo and treasurer of Lee Enterprises. He declined to comment on whether a bid was sent out. The acquisition will be paid for with $440 million in cash and the remainder from bank borrowings, with the spread likely to be 3% all-in, said Schmidt, though negotiations are still being completed. He declined to comment on the size of the bank deal and when syndication will be launched. B of A leads the current $50 million revolver according to Capital DATA Loanware.

Charter Communications dipped from 98 1/8 to the 96 1/2 range by the end of last week in response fourth quarter profit losses. Last Tuesday, $5 million changed hands at the 98 level before the announcement. No trades were reported at the end of the week, but dealers still believe the name has upside. Some market players think positive 2002 projections should keep the name strong. Rising operational cash flow was one of the positive indicators noted by dealers. Calls to officials at Charter were not returned by press time.