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Kmart's bank debt popped up to 68 by the end of last week from 53 as the smoke has cleared regarding news that certain subsidiaries of the bankrupt retailer have guaranteed the company's bank debt. Dealers said $50 million of its $1.5 billion deal traded over the course of last week with a piece trading early in the week in the 64-66 range. "People think the name will clear 80," said one trader, noting that both banks and distressed funds are more interested in the name now that it is clear some of Kmart's subsidiaries will guarantee J.P. Morgan's loan to the parent company.

BNP Paribas is in the market with two synthetic lease facilities. A $235 million facility for Chiron, a global pharmaceuticals company, which will fund the construction of two new buildings in California, hit the market last Tuesday. And a $60 million synthetic lease for Specialty Laboratories was launched last Thursday.

Amid widespread volatility in the investment-grade telecommunications sector over the last three weeks, analysts Doug Colandrea at Morgan Stanley and Ed Oppedisano ofDeutsche Bank have found common ground by recommendingSprint and AT&T bonds. Oppedisano is recommending the AT&T 7.3% notes of '11 (A3/BBB+), as they include a step-up coupon compensating investors in the event of ratings downgrades. He also says the company has done a good job reducing debt on its balance sheet, and will return to 180-185 basis points over Treasuries if the overall economy improves. The bonds were trading at 235 basis points over 10-year Treasuries last Tuesday. Colandrea says earlier issues by AT&T are also attractive, as language in the proxy statement gives bondholders a veto over the company's pending cable sale to Comcast. He says bondholders are likely to receive a cash payment from the company in exchange for giving the deal the okay.

The Gap, hit hard by a combination of fashion faux pas' and the weak U.S. economy, was still able to receive $1.3 billion in commitments on a new two-year credit facility last week. The old facility led by Citigroup was maturing in June and some bankers suggested The Gap could be as out of favor with banks as the casual dress it supplies within them. "The stock price has run away from them and the retail environment is very tough right now," said one banker. The new line is expected to close in March, but pricing and the lead banks could not be ascertained. Calls to the treasurer, Sabrina Simmons, were referred to a Gap spokeswoman who declined comment on the refinancing and a Standard & Poor's report on the company, which placed them on credit watch negative. The senior secured bank loan is on BBB+.

Varco International tapped Wells Fargo to replace leads ABN Amro and J.P. Morgan on the company's new revolver because the bank offered more competitive pricing on the deal. Varco went to the market looking for a bargain on the $125 million, three-year revolver following the expiration of its former credit facility. "Wells Fargo offered the most competitive terms," said Clay Williams, v.p. of corporate development. He said the chosen lead had the best structure and pricing at LIBOR plus 5/8 %. ABN Amro made an unsuccessful bid for the deal and J.P. Morgan has reportedly pulled out of the sector. Officials at ABN declined to comment. Officials at J.P. Morgan did not return calls by press time.

The primary market picked up again on some moderate stabilization in secondary market spreads. For the week, $10.75 billion of investment- grade corporate bonds hit the market. The demand was once again concentrated at the higher end of the ratings spectrum, with the two-tranche $3.5 billion deal for triple-A General Electric Capital Corporation reportedly seeing $6 billion in total demand. This is largely attributable to the strong technical position in corporates with investors having significant money to put to work as mutual fund inflows have continued despite the market volatility. Other notable investment-grade deals were the two-tranche $3.5 billion deal for General Mills, which was also reportedly well oversubscribed, and deals for Duke Capital and Citigroup. The high-yield market also bounced, with $1.2 billion in paper priced.

The primary market picked up again on some moderate stabilization in secondary market spreads. For the week, $10.75 billion of investment- grade corporate bonds hit the market. The demand was once again concentrated at the higher end of the ratings spectrum, with the two-tranche $3.5 billion deal for triple-A General Electric Capital Corporation reportedly seeing $6 billion in total demand. This is largely attributable to the strong technical position in corporates with investors having significant money to put to work as mutual fund inflows have continued despite the market volatility. Other notable investment-grade deals were the two-tranche $3.5 billion deal for General Mills, which was also reportedly well oversubscribed, and deals for Duke Capital and Citigroup. The high-yield market also bounced, with $1.2 billion in paper priced.

A wave of deals for pharmaceutical companies are coming to market amid burgeoning appetite from investors who view the sector as primed for consolidation and divestitures. Credit Suisse First Boston and Deutsche Bank are each leading deals in the market for pharmaceutical companies. Those credits come hot on the heels of Bank of America's loan for Accredo Health, which proved a home run with the buyside last week.

European fund managers say they are not interested in buying asset-backed bonds because single-A and triple-B rated corporate paper offers more upside. "If you're bullish on credit, it makes sense to buy lower-rated corporate paper which has more juice," says Davide Cataldo, Milan-based head of credit at Pioneer Investments. Even though ABS paper has become more liquid, Cataldo says he would rather buy riskier, more liquid corporate paper that allows for better trading flexibility. Lately, analysts have been warning investors to take a good look at ABS deals to see if companies are over-leveraging themselves, but investors are not interested in triple-A securitized paper.

Highlighting buyside hunger for health care credits, Credit Suisse First Boston and Citibank's $350 million acquisition credit for St. Louis-based Express Scripts, backing the company's acquisition of New Jersey-based National Prescription Administrators has already blown out, and the bank meeting has not yet even been held. "It's a highly rated BB credit, leverage is low, and the bonds are trading tighter than many investment grade names," said one banker. The official launch is this week, and pricing talk is LIBOR plus 21/ 4% or better, said a banker, but the credit is already full. "Investors rang up and said, 'I want $50 million,'" said one banker, commenting on the popularity of the credit. Express and NPA are pharmacy benefit management companies.

Fitch Ratings is looking to add a handful of analysts to its London office to bulk up its European structured finance group and to keep up with the amount of new business, says a firm official. Specifically, Fitch is looking for two commercial property analysts, a whole business securitization analyst and a surveillance analyst to keep tabs on commercial mortgage-backed transactions. Moody's Investors Service is also beefing up its structured finance team and aims to have over 100 analysts covering European structured finance by year-end (BW, 2/11).