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Debt issuance picked up significantly on the week, with just under $20 billion in debt hitting the market. Issuance patterns persisted from the previous week with AAA and AA credits tapping the market at the short end to take advantage of historically low absolute all-in rates, while BBBs extended out the curve to take advantage of historically cheap term financing. Average credit quality, weighted by dollar amount of debt issued, was at a still-high AA- level for the year. There are clear signs that the new issue market is starting to free up, although it is still very much a buyers' market. Kerr-McGee and Tyson, both low/mid BBB credits, had to come at a decent concession to the secondary market to get deals done. That said, both credits tightened on the break.

Energie Baden-Württemberg (EnBW) flagged up its intention to float next year with the launch of an innovative Eu490m going-public bond. But despite EnBW's defensive status, the success of its IPO is far from being a foregone conclusion.

Although liberalisation in central and eastern Europe is driven by the need to join the EU as soon as possible, utility sector reform in the region can be slow. But, while governments remain reluctant to sell off core assets, restructuring and IPOs have opened up acquisition targets to foreign predators. And those utilities that can shake off state support may also help to shake up the sector. Laurence Knight reports

Utilities deliver and dispose of the vital needs and functions of society. As such, they are prized by investors for their stable, non-cyclical attributes. But now, more of Europe's energy utilities are slipping towards lower, riskier ratings. Market liberalisation is driving the change, and the leaders have responded with aggressive cross-border, multi-utility consolidation strategies. Quentin Carruthers reports on how the capital markets are funding this increasingly competitive industry

Italy has been at the centre of attention among European utilities in the loan market during 2001, sparking two jumbo financings to facilitate takeovers. The first of the Italian deals relates to the sell-off by Enel, Italy's state electricity monopoly, of its generation assets. Under the Bersani decree, which follows from the EU Electricity Directive, no one utility may import or produce more than 50% of Italy's power supply, and accordingly Enel must sell assets to reduce its dominant market share. Its three gencos earmarked for sale by the end of 2003 are: Elettrogen (5.4GW), Eurogen (7GW) and Italpower (2.6GW).

Dominion Resources is interviewing banks to provide the financing to back the $2.3 billion acquisition of Louis Dreyfus Natural Gas. Scott Hetzer, senior v.p. and treasurer, said Dominion will have to come up with a $1.1 billion bridge loan that would be taken out by $900 million in bonds and $200 million in trust preferred securities. Dominion is talking to a group of banks at the moment about providing the financing, both the bridge loan and the bonds. No decisions have yet been made, Hetzer said. According to bankers, Merrill Lynch is believed to have an inside track on the financing because it is advising on the transaction, but Hetzer said Merrill would not necessarily lead the financing. Hetzer declined to name the banks being interviewed. He said the timeframe for having a commitment in place is before Nov. 1, when the deal could close. Officials at Merrill Lynch declined to comment.

J.P. Morgan Securities is offering each employee released by the company a book titled As You Leave: Your guide to leaving J.P. Morgan Chase. One former senior bond executive declined to directly address whether he found the pamphlet helpful, although he did speculate as to several potentially creative uses for it, such as wiping up spills, keeping drinks off the coffee table or house-training a pet.

High-yield analysts on the buy- and sell-side are focusing their attention on bonds of companies such as Grey Wolf, Grant Prideco, Parker Drilling Company, and Lone Star Technologies, which sell equipment to oil and gas drillers. While there has been weakness throughout the energy sector due to falling oil and gas prices, analysts say equipment providers have seen their bonds hit the hardest.

The Loan Syndications and Trading Association's annual conference, set for Oct. 10, is to go ahead following a vote of confidence from a majority of members. A number of participants from as far afield as Los Angeles and London contacted the LSTA to say people want to talk and see each other, said Allison Taylor, executive director of the LSTA. Over 90% of the attendants are based in New York so will not need to travel, according to an e-mail being circulated to LSTA members.

Michael McAdams, a well-known member of the loan investment community and founding member of ING Capital Advisors, left the firm two weeks ago to begin management of his own loan fund, Four Corners Capital Management, a financial partnership with Macquarie Holdings. "Macquarie will be able to enter the U.S. corporate credit markets and we will get a piece of their global network to expand outside the U.S.", said McAdams about the decision to team up with the Australian bank.

UBS Warburg and Bank of America have filled the roster for top-tier banks on their $6 billion term loan for Devon Energy, backing the purchase of Calgary-based independent senior oil and natural gas producer Anderson Exploration. A UBS banker said that in addition to the co-leads, First Union, J.P Morgan, Royal Bank of Canada, ABN AMRO, Deutsche Bank, Credit Suisse First Boston, Citibank and Bank of Montreal took $600 million pieces. Originally, the banks were offered $750 million pieces, but because of oversubscription, the allocations were scaled back, said the banker. Retail syndication is expected to begin in mid-October, noted the source.

Winstar Communications' bank debt hit the single digits last week in a $5 million trade, notching down from the mid-teens a week before. The debt settled in at six, a level so rare that even distressed players were marveling. Dealers fault problems with the debt's structure and say the company needs money to carry out operations. This is a sharp drop from levels last spring when Winstar was trading in the 32 range on news it would default on its bank covenants (LMW, 4/22). Winstar is a competitive local exchange carrier based in New York City. Calls to Richard Uhl, cfo, were referred to spokeswoman Laura Kline, who did not return them by press time.