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CDC Ixis Asset Management is considering launching a convertible arbitrage fund next year that will use over-the-counter derivatives and employ three times leverage. Dahlia Marteau, head of alternative fund management in Paris, said CDC is pondering the move to appeal to clients looking to take on leveraged exposure to the sector and is currently studying whether there is demand.

Green Property, a property developer, is considering whether to enter a swap to convert a recent fixed-rate bond into a synthetic floating-rate liability. Danny Kitchen, finance director in Dublin, said the property developer "may look at a [swap] on the bond in due course to bring down the cost." He declined to be more specific. The company raised GBP150 million (USD214 million) through a 15-year 7.25% bond offering late last month. The proceeds are being kept in sterling as the Irish company has substantial interests in the U.K.

Prudential Investments Japan, with a fixed-income portfolio of JPY100 billion (USD806 million), plans to launch a fixed-income fund in Japan that will purchase credit-linked notes and synthetic and cash collateralized debt obligations if there is enough demand. "We'll be conducting a feasibility study," said Mayuka Tomizuka, in the investment management department in Tokyo, noting that the decision will come down to the level of demand among its Japanese institutional clients. If there is strong demand the fund could launch in the latter part of next year. The manager has not established a target size or return for the fund, according to Tomizuka.

Bank of Scotland has entered an interest-rate swap to convert a EUR1 billion (USD888 million) fixed-rate bond into a synthetic floating-rate liability. Richard Schrimpton, senior director of capital markets in London, said the bank entered the swap because floating-rate liabilities better fit the firm's overall interest-rate profile. However, Bank of Scotland came to market with a fixed rate bond to satisfy investors. "It was all about investor demand. We did a roadshow and they made it clear they preferred fixed," he said. He declined to elaborate on the reasoning except to say the proceeds will be used for the bank's recapitalization requirements following its recent merger with Halifax to create HBOS Group.

Standard & Poor's plans to expand its European structured finance ratings group next year. Kurt Sampson, managing director of the team in London, said the rating agency is looking to hire five to eight staffers next year to meet the increased collateralized debt obligation deal flow. The rating agency currently has 65 analysts for European structured finance as a whole. Sampson said the growth rate of synthetic deals is outpacing that of straight cash structures and he expects this to continue. "This has proved to be a very attractive form of risk transfer, but for us the credit work is exactly the same [as for a cash deal]," he said.

WeatherXchange, a joint venture between the U.K. Met Office and Umbrella Brokers, has hired Dan Tomlinson, head of weather derivatives at ICAP in London, to expand its marketing and consultancy services. Tomlinson, who started last week, said he will report to Cindy Dawes, managing director in Bracknell, U.K.

Montreal-based Microcell Telecommunications, a wireless player with a network covering 95% of the Canadian population, is considering entering a cross-currency interest-rate swap. Microcell hired Mario Brin, a private financial consultant and derivatives specialist, three months ago to work closely with company officials to determine the best way to hedge its risk on a high-yield bond offering that matures in 2007. The company is looking to pull the trigger on the swap by early next year, said Brin. Officials at the company confirmed Brin's role.

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.

Bonus time...nobody move! As the year draws to a close, dealers are awaiting their bonuses with contained enthusiasm, noting an especially rough year could spell modest figures. They're also staying put, but to the cynics, corporate loyalty isn't the main reason. "Give it two weeks for bonuses to come out, then another week for the check to clear, then you'll start seeing people jump," one dealer said wryly. Another market player put things in a different light: "In this market, you should be happy just to have a job." He joked that his desk would put out a table at a holiday party just for resume swapping and networking.

Up-front fees for institutional tranches bounced up in September as the trend of deals with original issue discounts continued. September's three-month rolling average showed the biggest increase in fees (those commited at the lowest tier) to 9.7 basis points while October dipped a bit to 8.1 basis points and November shot up again to 11.5 basis points. These levels represent the average retail and institutional up-front fees for each million commited to acquisition related highly leverage loans for a rolling three-month average

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.

PNC Capital Markets has oversubscribed the $150 million line it is providing to Eastgroup Properties and is expecting other retailers to join in the credit. The bank has received commitments totaling $177.5 million, said Mike Thomas, managing director. Lenders were attracted to the Jackson, Miss.,-based real estate investment trust's low leverage, which is at about 37%. Its industrial focus--a more stable sector--was also a factor. "People perceive it to be less risky than office or retail," he said. The deal is expected to close this week and allocation levels will be set on Tuesday.