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The International Swaps and Derivatives Association has started to overhaul its 1992 master agreement documentation and replace it with an updated version by the end of 2002. The initiative is part of an ongoing effort to update documentation. Kimberly Summe, general counsel at ISDA in New York, said this process started at a meeting two weeks ago in New York and there was a similar meeting last week in London, approximately 100 derivatives professionals attended both meetings. Members have until Jan 7, 2002 to submit comments. "All members want to see this," said Summe.

A $55 million chunk of Enron Corp.'s bank debt traded earlier today in the 22-23 context. Both Goldman Sachs and Deutsche Bank are reportedly active in the name, although officials at both shops declined to comment. Dealers are also reporting an eight-point drop in Global Crossing's bank debt, trading down to 40 from 48 ½ on rumors of an imminent bankruptcy filing. Federal Mogul's debt traded up slightly to 58 in a $5 million trade.

BMO Nesbitt Burns, SunTrust Bank and Scotia Capital are eyeing a mid January return for the "B" term loan for Canadian door manufacturer Premdor with a reduced "B". The pro rata portion of the deal was oversubscribed, said Surjit Rajpal, executive managing director with BMO, but the "B" did not fly with investors post Sept. 11. "There was expectation there would be changes," Rajpal said, but lead arranger BMO decided to put the credit on ice until conditions in the loan market improved, rather than use the techniques available to make the deal more saleable, as seen on CommScope and Appleton Papers.

Credit Suisse First Boston and Bank of Nova Scotia, riding a hefty oversubscription, are eyeing a price flex for the six-year, $172 million Weight Watchers International "B" term loan. A banker following the deal said, "I would not bet against a tightening of the spread by 1/4% or 1/2%." Buysiders gobbled up the credit that is already priced at a trim LIBOR plus 3%, with bankers citing the improved profile of the once highly leveraged company, following a successful initial public offering in November and repayment of bank debt via a bond issuance. The new "B" will refinance existing debt, priced at LIBOR plus 4% (LMW, 12/10).

CIBC World Markets is structuring its first synthetic collateralized debt obligation and, unusually, over 50% of the credits come from its native Canada. David Allan, managing director and head of Canadian securitization in Toronto, said the CDO is referenced to a USD1 billion slice of the Canadian Imperial Bank of Commerce's CAD80 billion (USD51 billion) corporate credit portfolio.

Highly-rated bank credit derivative counterparties are set to benefit from the collapse of Enron, which was a top 20 credit derivatives market maker, said traders in London and New York. Firms in both countries were busy liquidating positions this week, which could total USD6 billion of gross notional exposure to Enron as a counterparty, according to some estimates. A tier one house typically executes USD50 billion a year.

Deutsche Bank sold EUR2-3 billion (USD1.8-2.7 billion, notional) of two-month out-of-the-money U.S. dollar calls/euro puts on behalf of a customer in the London fx market last Wednesday, causing implied volatility to slip almost a full percentage point. "That is just a massive move," noted a trader in London. A currency derivatives trader at Deutsche Bank confirmed the transaction, declining all further comment.

U.S. energy companies took the brunt of the fall out from the Enron collapse last week as credit-default swap spreads on major energy suppliers, such as El Paso Energy and Williams Co., widened more than 100 basis points after Enron's decision to file for Chapter 11 bankruptcy protection. A New York-based trader reported that five-year credit-default swap spreads on El Paso widened to about 325bps last Wednesday from about 225bps a week earlier. Williams also got hit hard with its spreads widening to 295bps Wednesday from about 180bps a week earlier. "Most of the market feels pretty tight, but the energy sector is a real pocket of weakness," the trader said.

One-week Swedish krona/euro implied volatility shot up a full percentage point last week as several hundred million euros worth of euro calls/krona puts hit the European foreign exchange options market. The krona tends to appreciate on the back of global equity gains, particularly in the tech sector, because Ericsson is a major component of the Swedish stock market. "The krona is dependent on the stock market, so when the market goes up, so does the krona," said a trader. As a result, one week implied vol rose to 9.5% Thursday from 8.5% a week earlier. He said a wide variety of corporates entered trades between EUR20-50 million (USD18-44 million) and that the several hundred million euros that traded represents approximately twice the normal volume for the currency pairing. Strikes ranged between SEK9.35-9.45, mostly with short-term tenors out to two months. Most of the options were entered when spot was SEK9.5 early last week. It was SEK9.35 last Thursday.

The Toa Reinsurance Co., one of Japan's largest reinsurers with over JPY338 billion (USD2.7 billion) in assets, plans to purchase its first synthetic collateralized debt obligation. "We see strong profitability in investing in this product," said Tomonori Ono, assistant manager in the fixed income and loan team in Tokyo. It plans to invest in up to five synthetic structures next year.

To benefit from the next bull-run, investors are on the lookout for the bottom of the market. Historically speaking, an upward trend has nearly always followed major shocks, such as the Cuban Missile crisis, JFK's assassination, the Kuwait invasion and the Russian crisis. It is possible that the trend over next year may also be upwards as major central banks cut interest rates and most countries implement fiscal easing policies in the aftermath of the Sept. 11 attacks. However, many analysts believe that further dips in the equity markets and continued high volatility may be seen next year before the upward trend becomes obvious.

Macquarie Bank, has hired Martin Lalor, a credit structurer in the financial markets group at the Commonwealth Bank of Australia in Sydney, in a similar role. Lalor will join Macquarie in a new position next month, reporting to Gary Vassallo, head of derivatives risk in Sydney. "We see opportunities for growth in this part of the business," said Vassallo, adding that with the expansion of the Australian credit derivatives market, it was looking for a dedicated structurer to handle the product range. Macquarie's interest-rate structuring team currently covers credit derivatives. Lalor could not be reached for comment.