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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."

In an effort to respond to an increasingly competitive CDO equity market, J.P. Morgan is unveiling its High Yield Debt Index 100 to serve as a tool for CDO equity investors to hedge CDO equity positions. Christopher Flanagan, head of CDO research at J.P. Morgan, said the product has been developed out of the firm's high yield trading desk as a way to give CDO investors a way to index and reference the performance of equity on their deals. According to Flanagan, J.P. Morgan is the first bank to present such an index for the market.

Uncertainty surrounding the fate of Kmart and its potential bankruptcy filing created a trading lock in the secondary market as LMW went to press as traders were staring at a laughable 50-75 bid/ask spread. That gaping span capped a wild ride for the bank debt, which started the week at 95-97, slipped on Monday to 85 as the ratings agencies continued to downgrade the name, and dropped even further to 70-75 by Wednesday.

Bank of America and Lehman Brothers have underwritten a $500 million bridge loan for L-3 Communications as part of the financing backing the company's $1.13 billion purchase of Aircraft Integration Systems, a division of Raytheon. Robert LaPenta, president and cfo, said in a conference call to analysts that Raytheon will replace the bridge loan with $1 billion in high-yield bonds and equity once it completes an audit, probably in April. The equity offering will be $400-500 million, stated LaPenta. In addition to available cash, an existing $600 million credit facility led by Lehman and B of A will be used to fund the acquisition. The revolver will be also be paid down through future capital market offerings, he added, declining to elaborate. One banker said the bridge loan is unlikely to be syndicated. Officials at B of A and Lehman did not return calls.

The Mexican government's decision to impose a 20% value added tax onto high frustose corn syrup, a key market for Corn Products International, prompted Moody's Investors Service to put the company's senior unsecured debt rating of Baa3 under review for a possible downgrade. Weaker operating performance, added leveraged, and the instability in Argentina--a key market for the company-- are also factors in the review. "It hasn't been a great time if you are a producer of high fructose corn syrup," saidPeter Abdill, analyst at Moody's, noting over capacity in the industry, high net corn costs, and high energy costs as other negatives. On a positive note, contracts with beverage companies might increase the price of high frustose corn syrup, which could boost demand. "Will it be enough to offset issues in Latin America and corporate performance?" It's still a tough question according to Abdill.

Lehman Brothers executed a reverse flex on the $270 million term loan "B" for Regal Cinemas after more than 60 accounts committed over $1 billion to the deal. A banker said, after overwhelming investor response the spread on the "B" was cut 1/2% from LIBOR plus 4% to LIBOR plus 31/ 2%. The $100 million revolver is still being syndicated, he added, and is still priced at LIBOR plus 31/ 4%. The financing backs Regal's exit from bankruptcy, and a potential revival for a once shunned and troubled sector (LMW, 1/14).

The Loan Syndications and Trading Association last week released two new "second generation" guidelines to refine the standard assignment documentation it set forth last year. One important change is a provision that now states that an agent must consent to transfers of revolving loans to anyone other than a lender already in the revolver. In addition, there has been a change to "first generation" documentation, which said if a borrower did not consent to a trade within five business days then he would be deemed to have consented.

Conversely, pricing on Lehman Brothers' credit for TSI Telecommunication Services has been flexed 1/4% across the board, highlighting a market that can still be tough to some new issuance. Despite optimism based on the market being back to pre-Sept. 11 levels and a number of credits filling quickly, other bankers believe the paucity of new issuance is papering over a more cautious and reticent investor base. Pricing is now LIBOR plus 33/ 4% on the pro rata and LIBOR plus 41/ 4% on the "B" term loan. Call protection has been added at 102/101, a banker added.

Applica, a manufacturer of small electronic consumer goods, worked with lead lender Bank of America to secure a $205 million asset-based credit facility for the company in order to score attractive pricing in a tougher economy. Adam Kaplan, treasurer, explained that looking ahead the company knew the softer economy would result in a tougher sell for a cash-flow deal. "We knew covenants would be stepping up and so would pricing," he said. He expects asset-based lending to become more mainstream as leveraging cash flow is more pricey than leveraging assets.