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Tensions revealed last week between France Telecom and Mobilcom, a German company in which it owns a 28.5% stake, will continue to push FT's spreads wider as the two companies continue to duke out their problems through the media, say London-based telecom analysts. "It smells, and in the coming weeks, it's going to get worse," says Simon Surtees, telecom analyst at Bear Stearns. Surtees reckons spreads on FT bonds could widen to as much as 400 to 500 basis points over swaps before the Mobilcom problem is resolved. At some point FT bonds will be a screaming buy, he adds, but it is anyone's guess as to when that will be. As of last Wednesday, FT's 53/4% of '04 was trading at 234 over swaps, compared to Poland's TPSA, of which FT is a part owner, which has a 6 1/8% of '04 which was trading at 217 over.

Deutsche Bank is shopping a $700 million asset-based refinancing for Maryland-based Williams Scotsman. The company, which operates mobile office and storage unit lease fleets, recently completed a bond deal, said a banker. The credit consists of a $500 million revolver and $200 million term loan, both with five-year maturities. Pricing on the deal is LIBOR plus 3% across the board. Officials at the company could not be reached for comment. BT Commercial Group and NationsBank led the previous credit line arranged in 1997, according to Capital DATA Loanware.

Morgan Stanley has expanded the role of its global credit research group, and named Ryan Marshall, managing director and former global head of securitized products research, as global director of fixed-income credit research. Marshall replaces Stephen Penwell, managing director and the new head of North American credit sales (BW, 1/28). By combining research across all the different credit markets within fixed-income, the firm hopes to offer a wider range of options to issuers and investors, Penwell says. He adds that no one has been released as a result of the changes.

Approximately $70 million of Nextel's bank debt traded last week up from 80 to 82 5/8 as higher reported operational cash flow and revenue for the company's domestic market helped boost the name. The term loans "B" and "C" sold last Thursday in two pieces of $2 million and five pieces of $2.5 million in the morning and a $5 million piece traded midday at 82 1/8. By the end of the day, market players said they believed that $40 million of the name traded in the retail sector at 81 1/2. Buyers and sellers could not be determined. Nextel has gained ground from earlier in the week when $10 million of the paper was auctioned off at 80, according to traders. By midweek the name had been offered in the 79 1/2 to 81 range.

Graphic Packaging, a Golden Colo.-based manufacturer of food cartons, switched its lead bank from Bank of America to Credit Suisse First Boston and Morgan Stanley for a refinancing of its credit line. Graphic gave B of A an opportunity to bid on the $425 million credit, but Morgan Stanley and CSFB provided better terms, explained Luis Leon, cfo of Graphic. The company is taking advantage of current strong investor appetite in the high-yield markets to refinance all of its debt by putting in place new notes and bank debt, he added, declining further comment on the politics of the switch in lenders. The credit refinances a $325 million, five-year term loan and a $400 million revolver.

U.S. and European hedge funds, both start-ups and established, are starting to make forays into the European high-yield and distressed-debt markets, according to London-based salesmen. "Hedge funds have been monitoring the market for the past four years and are now beginning to step in," says a salesman at Deutsche Bank. "The equity arb desk here has passed me at least 10 new [accounts]. There is undoubtedly a significant increase in interest in European high-yield," adds a salesman at Credit Suisse First Boston. Some are established hedge funds entering the distressed market for the first time and others are start-ups, he says.

High-yield media analysts say investors should not jump to add exposure to television and cable broadcasters following last week's decision by a U.S. Appeals court, which is widely expected to encourage industry consolidation. Steve Schutzman, Salomon Smith Barney media analyst and anInstitutional Investor 2001 All-America Fixed-Income Team second-teamer, suggests investors take gains on Young Broadcasting 10% notes of '11 (B3/B-) and the Sinclair Broadcast Group 9% notes of '07 (B2/B). The Young paper was bid at 97.5 last Wednesday, while Sinclair's bonds were bid at 103. Both companies are candidates for consolidation, but Schutzman says that asset sales do not always benefit bondholders. Young, for example, will use only a fraction of the proceeds from a recent asset sale to reduce leverage. Shutzman says that while junk broadcasters continue to benefit from defensiveness on the part of portfolio managers, current bond prices are higher than huge debt levels and high fixed costs would seem to justify. He declines comment on how low the bonds may trade.

Trading started slow last Tuesday after the holiday, but volume was normal by mid-week. It was a soft week overall, though energy, healthcare, gaming and supermarkets were well bid. Here was other action.

Invesco is working withLehman Brothers on a $300 million collateralized loan obligation comprising roughly half European loan collateral and half U.S.-based collateral as larger leveraged buyouts drive bigger bank deals in the European new issue market. Invesco is still in the process of ramping up the deal and will be looking to close the transaction by the end of next month. "We are beginning to see the European [loan market] maturing. It doesn't have the size or liquidity of the U.S. market, but it has the same type of investment advantage," said Brian Mitchell, product manager at Invesco, explaining why the firm is buying up European collateral.

J.P. Morgan has created a debt capital markets banking position to concentrate solely on the U.K. market and has hired Nick Denman, previously a debt banker at Goldman Sachs, to fill the slot. John Mayne, J.P. Morgan's London-based co-head of DCM Europe and to whom Denman will report, says the position was created to increase the firm's coverage and to respond to the enormous opportunities for sterling-, dollar- and euro-denominated bond issuance in the U.K. market. Mayne says he is not planning any additional hires at the moment, but will continue to monitor the markets closely and respond to growth areas. Calls to a Goldman spokeswoman seeking the name of Denman's replacement were not returned.

Kmart's bank debt climbed last week from a high of 68 two weeks ago to the 70-71 range by last Wednesday withDeutsche Bank rumored to have participated in a $15 million trade on Tuesday. After a strong week, the name dipped slightly to 68 1/2 last Thursday with a $5 million piece trading. Buyers and sellers on Thursday's trade could not be determined by press time.

Lamar Media has drawn down $200 million from an incremental facility instead of its $350 million revolver to take advantage of the option while it was still available. The provision for the incremental facility, written into an original $1.4 billion credit facility, affords the company access to a total of $400 million at the discretion of the bank group. The company wanted to secure $200 million of the incremental facility now because it could not be guaranteed access to the funds later, explained Keith Istre, cfo of Lamar. He declined to be specific about why the line may not be available to the company in the future. The company will use the $200 million to support current and future acquisitions.