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Sage Advisory Services is swapping 15%, or $75 million, of its $500 million portfolio, out of agency debentures into spread product, specifically corporates and mortgage-backed securities. Bob Smith, portfolio manager at the Austin, Texas-based firm, says the agency debentures are being sold because the firm believes interest rates have bottomed out, diminishing the benefits attached to owning positive convexity. Smith will seek to sell straight non-callable, or bullet, Fannie Mae and Freddie Mac bonds in the five- to seven-year sector. The firm has already begun the move.

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.

UBS Warburg managed to oversubscribe the "B" tranche of its deal for Neptune Technologies, despite gripes from some investors that pricing on the deal was not high enough to garner support. A UBS syndications banker said 19 institutions came in on the $125 million tranche, oversubscribing the piece by a little more than $100 million right before the Thanksgiving holiday. He said the bank expected to do final allocations by the end of last week with commitment sizes ranging between $10-15 million on the deal that had leverage issues raising concern among investors. "It's a small deal but those who did their homework were able to get around it," he said, noting that the leverage multiple of 3.8X on the deal was a tough hurdle for some along with the small size of the deal. "It's a pretty defensive business," he added. Another banker noted that stable operating results won out over leverage concerns with an institutional market looking to invest cash.

The institutional round of SunTrust's deal for U.S. Xpress has been postponed until next year after the term loan "B" struggled through syndication and existing lenders decided it was best to come back to the market when a better environment exists for the credit. A banker close to the deal said SunTrust, along with existing lenders Wachovia Securities, Bank of America and FleetBoston Financial, have extended the company's existing $225 million deal, rolling over their commitments. Originally, the company came to market to refinance its existing deal. The banker declined to comment on whether or not pricing on the deal changed due to the extension. Ray Harlin, cfo, did not return calls by press time.

After a huge calendar in the week prior to Thanksgiving the market has essentially closed down the past two weeks with just $13.8 billion priced. The weighted average maturity continues to lengthen as BBB credits look to lock in attractive long rates even as the Treasury market backs up. For their part, investors appear to have a strong appetite still for longer-dated paper. One other trend worth noting is the pickup in high yield issuance. Since the bond and equity markets have started pricing in a robust first half recovery in the economy, the high yield market has been well bid, retracing about 80% of its post 9/11 losses. This strength has been further supported by flows into high yield funds, which totaled about $1.5 billion in the previous two weeks.

Investors in Indosuez Capital Funding IV, a $1.3 billion collateralized debt obligation managed by Crédit Agricole Indosuez, reportedly voted to switch management over to Royal Bank of Canada last week, citing the defection of portfolio manager Dan Smith and other key staff to RBC last month. Smith confirmed that a majority of the controlling noteholders has rejected Crédit Agricole Indosuez as the fund's current manager and appointed RBC as the successor on the deal, but declined further comment. But Paul Travers, portfolio manager at Crédit Agricole Indosuez, said a new management team is not managing the fund. He declined to comment on whether a vote had taken place to supplant the deal's management team, but said, "We have not lost any funds. We are managing the funds as if we will own them forever."

NY Life is in the process of marketing a $250 million collateralized debt obligation on the heels of a recently closed $330 million synthetic collateralized loan obligation, as the insurer looks to grow its CDO business. "We are a recent entrant into this market and this is our third transaction this year. We are focused on leveraging our resources and expertise in leveraged loans and other asset classes," said Tony Malloy, portfolio manager at the company, who expects the company to do more transactions next year. NY Life's first deal of the year used asset-backed securities as its collateral. NY Life acts as a manager as well as a less than 50% investor on its deals.

Slowing revenues after Sept. 11 prompted RFS Hotel Investors to seek amendments to the terms of its credit lines. Kevin Luebbers, cfo and v.p. of finance, said the company was not at risk of credit defaults but was trying to be "proactive" as it predicted EBITDA would fall over the next year. Among the changes, the maximum allowable leverage ratio was increased to 50-55 from its prior 45-50. "After Sept. 11, EBITDA was going down. Relaxing these terms was done in recognition of that," he said. "We sought this out proactively; RFS still had a strong balance sheet, compared to our peers in the lodging industry. Our competitors went back to their bank groups for relief because they were in distress. We weren't in that position." The Memphis, Tenn.-based company owns 58 hotels throughout the country.

Sankaty Advisors has reportedly wrapped up its $500 million collateralized loan obligation--Race Point CLO I-- backed by leveraged loans. Market sources said the structure is a cash flow arbitrage deal with notes sold to investors by underwriter Deutsche Bank. Pricing is reportedly 43 basis points over LIBOR on the $327 million AAA tranche, 75 basis points over LIBOR on the $71 million AA tranche, 135 basis points over LIBOR on the $22 million A- tranche, 240 basis points over LIBOR on the $20 million BBB tranche, and 700 basis points over LIBOR on the $21 million BB- tranche of the transaction. The remaining equity piece is reportedly $39 million. Kim Harris, portfolio manager at Sankaty, and the Sankaty press office, did not return calls.

Approximately $30 million of Burlington Industries' debt traded last week in the high 60s, up slightly from quoted levels two weeks ago in the 65 range. Dealers were quoting the bank debt at 67-69 by the end of the week. Some predict levels will bottom out in mid-50s because of the struggling textile industry. A dealer explained that market players who aren't in the paper want to see levels drop further to get into the name in hopes that there will be a return. "They're trying to push it down, [thinking] that eventually it will trade back up," he said. He added that the outlook on the textile industry remains grim. "Stay away," he said with a laugh. Burlington, based in Greensboro, N.C., makes fabrics for both the apparel and home-furnishing sectors. Calls to Charles Peters, cfo, were referred to spokeswoman Delores Sides, who did not return them by press time.

Commitments on the $150 million revolver for Smart & Final will be scaled back as the BNP Paribas-led credit finished up oversubscribed with $175 million in commitments. A banker close to the deal said it was scheduled to be funded by the end of last week. Harris Bank acted as syndication agent on the credit and Rabobank as documentation agent. BNP Paribas replaced Bank of America and Credit Lyonnais, as both firms dropped out of the credit after leading the old deal. Pricing is based on a grid and starts at LIBOR plus 21/2 % with a 1/2% commitment fee. Pricing has gone up 1/4% from the old deal. Richard Phegley, cfo of Smart & Final, did not return calls inquiring about the switch in lenders.