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Specialty pharmaceutical company First Horizon Pharmaceutical tapped a $152 million six-month interim credit line from Deutsche Bank to acquire anti-hypertensive drug Sular from AstraZeneca, and First Horizon is now planning to take out the facility with either permanent debt, an equity offering--private or public-- or a hybrid. "The interim line gives First Horizon flexibility in terms of deciding to pay down the debt through an equity offering or permanent debt while enabling First Horizon to act quickly on the transaction," explained Bala Venkataraman, cfo of First Horizon.

Fitch Ratings has downgraded Tricon Global Restaurants to BB+ from BBB- following its announced acquisition of the Yorkshire Group, owner of the A&W and Long John Silver restaurant chains. Under the terms of the acquisition, Tricon, which runs Pizza Hut and KFC, will pay Yorkshire $270 million in cash and assume another $50 million of debt. The rating action reflects a higher level of leverage than had been anticipated due to the acquisition financing as well as incremental capital expenditures to develop the acquired brands and ongoing share repurchases, according to Fitch.

Franklin Templeton is ramping up a new collateralized loan obligation namedFranklin CLO III. The fund's latest deal is slated to be roughly $400 million, but a source close to the situation said deal size has not yet been finalized as all of the equity for the transaction has not been raised. The manager is ramping up assets for the leveraged loan structure and has warehoused roughly 50% of those assets so far. Issuance of notes for the deal is to take place in April or May following the current marketing period. Merrill Lynch will underwrite the notes. Officials at Franklin Templeton declined to comment and Merrill Lynch officials did not return calls.

Loan-participation funds continue to struggle under historically low LIBOR rates, defaults and write-downs on holdings, but according to investors an improving economic environment and the end of a deteriorating credit cycle offer some hope for the funds. The collective fund values have dropped from $27 billion in November to just over $20 billion last month, according to Lipper data, and there are not really too many positive signs yet, according to Don Cassidy, senior research analyst at Lipper. "I think we may have a few months of difficulty ahead," he added. Managers of the funds have experienced a torrid time for over a year with default problems coexisting with the onset of mark-to-market pricing (LMW, 11/5).

Traders say last week was extremely quiet in the secondary junk market, with most of the trading centered on new issues. Secondary spreads were flat overall through Thursday, the traders say.

Morgan Stanley and J.P. Morgan have filled the book on the $350 million deal for Steel Dynamics after a $200 million, seven-year senior subordinated bond offering and a shift from the pro rata to the "B" overcame some market reluctance. A banker said the "B" tranche was taken up by $30 million to $205 million while the $175 million pro rata dropped by $30 million. Pricing and the tenor on the bank debt stayed the same, he said. "Steel is not everybody's cup of tea," he noted.

David Walker has resigned from J.P. Morgan Securities where he was co-head of U.S. high-yield research, according to a colleague. The reason for his departure could not be determined. Walker did not return calls placed to his office or his residence. A former colleague says he has decided to do something "sort of" like a hedge fund, but would not be more specific. It could not be determined whether J.P. Morgan plans to replace Walker. One firm official says that Doug Conn, the other co-head of U.S. high-yield research, is currently the sole head. Walker reported to Chris Linneman and Peter Schmidt-Fellner, co-heads of high-yield, both of whom did not return calls.

XL Capital Assurance, a New York-based financial guarantor, has hired two securitization veterans for its consumer asset securitization group. Seleena Baijnauth joins as a senior analyst from J.P. Morgan Securities where she reported to Matt Whallen, v.p. in charge of home equity ABS. Lima Ekram joins as a v.p. from Financial Guarantee Insurance Company (FGIC) where she reported to David Steel, managing director and head of mortgage-backed securities, says Mitch Karig, a spokesman for XL. Both will report to Peggy Wallace, managing director and head of the group. Karig says that Ekram will be managing MBS transactions while Baijnauth will analyze transactions for all asset classes. Both are newly created positions, and Karig says the new hires reflect growth in XL's consumer asset securitization group, currently comprising five people. No additional hires are planned at this time, he adds.

Sunrise Assisted Living issued $125 million in new convertible bonds last month to pay down $92 million in bank debt that the company used to redeem $150 million in expiring convertible notes. Sunrise received commitments from Credit Suisse First Boston, Wachovia Bank, and FleetBoston Financial for the $92 million term loan while giving investors a 30-day notice regarding the redemption, said Charles Post, senior v.p., corporate strategy and capital markets. The company decided to take advantage of comparatively better pricing with a new convertible deal rather than holding onto the bank debt for future funding.

Wachovia Securities and Jefferies & Co. are working on several collateralized loan obligations consisting of loans issued by middle market specialty lenders. CLO players say the market may see more issuance given originators' eagerness to find cheaper sources of funding at the attractive LIBOR levels.

UBS Warburg has added veteran mortgage-backed securities analyst Laurent Gauthier to its securitized research team in New York. He will be a director and report to Laurie Goodman, securitized product research chief. Gauthier joins from Banc of America Securities, where he was a v.p. reporting to mortgage research chief Sharad Chaudhary. Goodman says Gauthier was a good fit because he has analyzed and modeled a variety of securitized products, including adjustable-rate mortgages and home equity loans. The slot opened up when Phillip Millman, who had been the group's ABS analyst, transferred internally to the firm's information technology group.

The oversupply of fund money relative to the availability of paper in the loan market is more likely to benefit companies with rated loans than unrated ones, leading to cheaper borrowing costs. "Only companies with rated loans benefited from a downward flex in market pricing last year, while unrated loans were much more likely to have pricing flexed upwards at the expense of the company," noted Steven Bavaria, director of Standard & Poor's and head of its loan rating business. "Corporations with rated loans were able to save millions of dollars in interest costs last year, as they benefited from downward pricing using market flex pricing clauses," Bavaria stated. Not one unrated loan was flexed down last year, and 24% of unrated loans were flexed up.