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Bank of America is pitching volatility swaps to its clients because it expects Japanese equity market volatility to fall as the Nikkei plummets. The Nikkei fell below the Dow Jones Industrial Average last week, driving up implied volatility to its highest levels since the August 1998 Long-Term Capital Management crisis, according to Nick Waltner, managing director and head of equity financial products in Tokyo. As a result of the high vol, hedge funds and relative value players are looking at variance swaps to speculate on volatility falling.

U.S. airlines, such as American Airlines and United Airlines, are expected to be the most active names in the credit-default swap market when trading returns to normal levels. Credit-default swap traders said spreads for five-year protection on American Airlines jumped to 410 basis points from about 210 basis points last Monday. The airline industry faces USD370 million a day in lost revenues through grounding their services. The loss will also have a negative impact on the companies' credit worthiness, which will cause spreads to widen further.

Barclays Capital's derivatives division has moved from its New York headquarters at 222 Broadway to a disaster recovery building in Carlstadt, N.J. The division includes credit, interest rate and equity derivatives trading, research, structuring and sales.

ABN AMRO is looking to double its credit derivatives desk in Singapore to six to meet growing client interest in Asia for credit products. Aashish Ponda, head of credit derivatives for Asia-excluding Japan, in Singapore, said he plans to hire an additional trader and at least two structurers in the coming months. Ponda continued that it is seeing growing interest in clients considering structured credit products and needs to make the hires to take advantage.

Moody's Investors Service lowered the rating on American Lawyer Media's $29 million secured revolving credit facility reflecting the company's poor financial performance compared to its projections. ALM finished the quarter ending June 30, 2001 with $1.6 million in cash and bank availability of $1.8 million. Moody's notes that cash has the potential to be insufficient during the immediate term. The New York City-based company publishes law journals. Stephen Jacobs, cfo, could not be reached for comment. Calls to a spokesman's office also were not returned.

PG&E National Energy Group closed a $1.25 billion deal last month after it paid down its existing $1.1 billion deal as part of an effort to consolidate the business. The deal breaks down into a $500 million, two-year tranche and a $750 million one-year tranche. "The new deal is part of our financial strategy. We moved the debt up a layer in the corporate structure," said John Cooper, senior v.p. finance. The company has been in the process of a restructuring plan since National Energy Group formed in December 1998, he explained. First the company did a bond issue then worked on bank financing. The original deal was under PG& E Corporation. National Energy Group, a subsidiary of PG&E Corp., develops, owns and operates electric generating and gas pipeline facilities and provides energy trading, marketing and risk-management services. It is headquartered in Bethesda, Md.

Viad, a holding company for payment services and convention event areas, decided to go with a commercial bank rather than a pure investment bank on a new facility because the company feels a bank could best respond to its needs. David Iannini, treasurer, said the company took bids for the facility, but decided to stay with incumbent Citibank. "Investment banks are struggling because of the commercial banks. They don't have the same mentality or personnel to do the revolvers." Iannini continued, the investment banks need to adapt by providing all lines of credit on the same terms.

Lehman Brothers' $1 billion credit for Tesoro Petroleum has been assigned a Ba2 rating byMoody's Investors Service, with the rating incorporating the leverage taken on for the large, debt-funded BP purchase. Additionally, the two refineries, infrastructure assets and related marketing of BP appear to have been bought at a premium relative to other refining asset transactions. The credit is split between a $175 million five-year revolving credit, an $85 million five-year term loan "A," a $90 million five-year delayed draw-term loan, a $300 million six-year term loan "B," and a $350 million capital markets term loan, expected to be refinanced with a subordinated note issuance. The term loan "B" has been well received in syndication following launch, as bankers cited the attractiveness of the sector (LMW, 9/10).

Richmond, Va.-based Dominion Resources, one of the nation's largest producers of energy, will use a bridge loan to finance the acquisition of Louis Dreyfus Natural Gas prior to putting in place $900 million in bonds and $200 million in preferred trusts. The acquisition is being made for $2.3 billion in cash, stock and assumed debt. Merrill Lynch, who advised on the transaction is believed to be leading the financing. Officials at Merrill could not be reached for comment. Scott Hetzer, senior v.p. and treasurer did not return calls. Calls to spokesman Mark Lazenby were not returned. Advisers on the transaction were Merrill Lynch to Dominion and Lehman Brothers to Louis Dreyfus.

Pediatrix Medical Group, a Fort Lauderdale, Fla.-based neonatal physician network, increased its credit facility by $25 million to continue growth through acquisitions, rather than swap stock. Bob Kneeley, director of investor relations, said Pediatrix is planning to spend $40 million acquiring practices this year and will spend another $50 million next year. The company had a $75 million maturing three-year revolver with a one-year extension led by BankBoston, but upsized this to a $100 million, three-year revolver led by Fleet Bank. The old credit was set to expire at the end of October. The proceeds will pay for the physician practices Pediatrix acquires. "We've never used equity when acquiring doctors," said Kneeley, explaining Pediatrix wants to avert the selling practices from the uncertainties of the equity market.

There may be virtually no corporate bond market to speak off, but Hungary does have the most liquid government debt market in the region, largely due to the efficiency of its consolidated state debt management agency. The agency has already begun preparations for a smooth transition from forints to euros, not just by realigning issue maturities but also by targeting new investors. But it is Hungary's central bank that has boldly led the way towards EU transition, as Laurence Knight reports