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An estimated $20 million chunk of Xerox's bank debt notched down slightly to the 81-83 range from the mid-80s on a Standard & Poor's downgrade of the company's revolver to BB from BBB-. The company, while going ahead with its debt reduction plan, lost business in late September as a result of the World Trade Center attacks. Regal Cinemas, still being traded as a distressed credit, has moved up to 102-104 from the mid-90s on the prepackaged bankruptcy filing.

Credit Suisse First Boston Tuesday launched syndication of its $1 billion credit for NorthWestern, backing the planned acquisition of Montana Power's transmission and distribution business for $1.1 billion. Pricing on both the $400 million, 364-day revolver and $600 million, 364-day acquisition facility is LIBOR plus 1 1/4%, based on a grid, with a 20 basis points commitment fee. Spokesman, Roger Scrum of NorthWestern confirmed CSFB was arranging the revolver facilities, but was unable to answer further questions, as the acquisition has still not yet closed and Kipp Orme, v.p. of finance and cfo at Northwestern is in New York. Asked when the acquisition is set to close, Scrum responded, " It's in the hands of the regulators." There is no set time for the deal to be approved.

Bank of America has hired three fixed income and credit derivatives pros and plans to add up to five more to beef up its commitments in Japan as part of a restructuring effort. Growing client demand for fixed-income and credit products, such as structured notes and synthetic collateralized debt obligations, has prompted the move, according to Kenichi Tatsuzawa, managing director and head of the global markets group in Tokyo-which runs all fixed-income related products. Before the department was structured along product lines with nobody taking direct responsibility for Asia. The firm has implemented the change to better co-ordinate the products in the region as the department grows.

CDC Ixis has launched an over-the-counter equity derivatives desk in New York. CDC started trading at the beginning of the month under the direction of Richard Suth, head trader, who joined from CIBC World Markets about three months ago. Suth said the desk is part of CDC's push to capture a piece of the burgeoning U.S. equity derivatives market.

Bear Stearns International is planning to grow its London-based interest-rate product group by nearly 50% in the coming months as part of the firm's ambition to become a larger player in the European market, according to George Polychronopoulos, senior managing director. Polychronopoulos, who will lead the effort, joined last month from Deutsche Bank, where he was most recently head of marketing to Scandinavia and Greece (DW, 10/1). Previously he had been head of Scandinavian and Greek interest-rate products. At Bear Stearns, his position is parallel to that of Jérôme Camblain, who runs the sales side.

Volumes in the London credit derivatives market slumped last week as traders turned their attention away from making prices and instead focused on settling contracts on Railtrack and Swissair. Overall volumes for the asset class were roughly 25-30% lower than an average week, according to traders. "There's been a noticeable decline because participants are settling contracts and thus doing less business," said Tim Frost, head of European credit derivatives at J.P. Morgan in London. He said the decline indicates a "lack of infrastructure" as the credit derivatives market continues to grow. "Most people are spending a lot of their time this week on Railtrack," noted another trader.

Indianapolis-based Great Lakes Chemical Corp., a producer of specialty chemicals for flame retardant devises, such as fire extinguishers, is considering tapping the interest-rate derivatives market for its first foray into any type of derivatives product. John Kunz, treasurer, said the company's decision to begin eyeing interest-rate swaps has been prompted by a continued flattening of the U.S. Treasury yield curve.

Deutsche Bank is recommending clients purchase one-year at-the-money U.S. dollar calls/yen puts to take advantage of low volatilities caused by the Bank of Japan's intervention to create a dollar floor around JPY119 and the belief in a U.S. recovery next year, said Ken Landon, senior currency strategist at Deutsche Bank in Tokyo. "It's a pretty straightforward strategy-a lot of people like that," he added, "anyone who wants to take a directional view would be interested."

Five-year protection in the auto sector widened by roughly 20 basis points across the board last week as a host of negative credit, earnings and technical issues led to higher protection costs. DaimlerChrysler widened from 175bps at the start of the week to 195bps by Thursday, despite the lack of any company-specific news.

Danish pension funds over the last two weeks have executed a flurry of swaptions, amounting to several billion euros in notional size, to hedge exposure to guaranteed annuity plans. Danica Pension pulled the trigger on the largest deal, having spent a premium of EUR75 million on an option to enter a receiver constant maturity swap, according to senior swappers at a major U.S. and a European derivatives house. A premium of that size was estimated to equate to a notional size of between EUR3-4 billion. The funds are believed to have come to market now because the fall in global interest rates and equity markets has left them with substantial liabilities on fixed-rate annuities. Officials at Danica declined comment and press officers did not return calls.

One-month Japanese yen/U.S. dollar implied volatility fell to 9.75% Thursday, down from 10.25% a week earlier, as demand for yen puts/dollar calls increased as the dollar continued to remain strong despite anthrax scares across the U.S. Hedge funds and investment banks were the most active, buying one-week yen puts/dollars calls as the one-month 25-delta risk reversal moved further in favor of yen puts. The options typically had strikes around JPY119.75 when spot was trading around JPY121.20.

Dearborn, Mich.-based CMS Energy is setting up a weather derivatives desk, which will be based in Houston. The energy company recently hired Aaron Studwell, a meteorologist at Reliant Energy, to develop trading strategies and research weather patterns. Studwell said he will be in charge of trading and plans to hire an additional trader--it currently only has one--when volumes pick up. "This is going to be a graduated effort. We want to be a player in this market and provide something more to our customers," Studwell said.