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HBOS, the UK's largest mortgage lender, is poised to make a dramatic entry into the securitisation market with a £2.5bn-£3bn deal to be lead managed by Citigroup/SSSB and JP Morgan. The move will give the booming European mortgage backed securities (MBS) market its second ultra-large issuer, alongside Abbey National. HBOS's master trust structure is likely to appear in the second quarter. EuroWeek has also learnt that Abbey's next MBS will be led in the next few months by Barclays Capital and JP Morgan. Recent Abbey deals have varied between £2.2bn and £2.7bn in size.

Collateralised debt obligations are due to kick off primary ABS issuance this year after a week dominated by intense activity in the secondary market. The first deal to break the new year hiatus will be a Eu513m arbitrage CDO for investment managers Prudential M&G, via Credit Suisse First Boston, expected to be priced today (Friday).

Deutsche Bank and Credit Suisse First Boston's $1.25 billion refinancing for PanAmSat is off to a solid start with the $600 million, seven year "B" term loan half full at press time. Last week Standard & Poor's assigned a BB rating to the senior secured credit facility and a B rating to the proposed $500 million senior unsecured note offering. A banker set out the spreads, with the "B" carrying LIBOR plus 3 1/4 %; the $400 million, six-year term loan "A" priced at LIBOR plus 2 3/4 %; and the six-year, $250 million revolver at LIBOR plus 2 3/4 %. There is a 3/4 % commitment fee on the revolver. Amortization of the term loans does not begin until 2004. There is a financial covenant for an initial five times debt to EBITDA ratio. Hughes Electronics owns 81% of PanAmSat, and this refinancing is connected to the plethora of transactions tied to the proposed merger of EchoStar with Hughes Electronic (LMW, 12/24).

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."