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A 500-700 million structure backed entirely by mezzanine loans is being touted as an innovative cross between a collateralized debt obligation and a leveraged fund. The deal taking shape in Europe is unique in that its leverage is less than in a traditional CDO, but higher than a straight fund, sources told BondWeek, an LMW sister publication. The vehicle, AIG Mezzvest Funding, is scheduled to hit the European market in the next few weeks, according to syndicate officials in London. It has not been decided if the product will be pitched as a typical cash flow arbitrage CDO or a leveraged fund. The collateral manager is AIG Mezzvest, in London.

J.P. Morgan and Congress Financial, First Union's asset-based finance unit, are preparing a $375 million secured credit facility for Bensalem, Pa.-based Charming Shoppes. John Sullivan, controller for the women's plus-size apparel chain, said the credit backs the acquisition of Lane Bryant for $335 million. Congress provides Charming Shoppes existing line of credit and J.P. Morgan Securities acted as financial advisor in the transaction. Sullivan declined comment on pricing, except to say it will be similar to the spread on the existing line. Timing of the bank meeting could not be ascertained.

Extended Stay of America is set to close a $900 million credit facility by the end of July, replacing an existing $1 billion deal. Gregory Moxley, cfo, says the company chose to split the new financing between the credit facility and by issuing $300 million in senior subordinated notes. "This balances out our capital structure and gives us more fixed-rate debt," he explained.

Secondary market players amused even themselves last week as they bantered and chased a mammoth $150 million trade of Crown Cork & Seal bank debt that never actually happened. "It's all total bull," a dealer said of the trade. "I have the paper offered to me right now, but it hasn't traded. There's a huge piece that everybody wants to trade and supposedly everyone's trading it. It's kind of funny to watch."

Michael Jordan, a senior corporate bond salesman and managing director at Merrill Lynch, left late last week and will be working in a similar capacity at Deutsche Bank Securities in New York. Officials close to the situation say Jordan will not be replaced at Merrill, and his accounts will be turned over to current sales executives. Jordan reported to Frank Corcoran, managing director and head of investment grade sales in New York, who declined comment. At Deutsche Bank, Jordan will report to Tony Britton, managing director. Britton referred calls to a spokesman, who declined comment. Jordan could not be reached for comment.

Bank of America is in the market with a new $70 million facility for Baltimore-based MedStar Health, a not-for-profit health care system located in the mid-Atlantic region. The facility comprises a $10 million revolver and $60 million term loan; both are 364-day and secured by unrestricted cash and marketable securities.

Rittenhouse Financial Services has hired Roger Early, former ABS portfolio manager at Delaware Investments, as its new v.p. investment-grade portfolio manager and market strategist. Early will report directly to John Waterman, chief financial officer of Rittenhouse, a Radnor, Pa.-based firm affiliated with Nuveen Asset Management. Based in Chicago, Nuveen has $61 billion under management.

Morgan Stanley and Bank of America last week pitched increased pricing and a tranche reduction on their $500 million deal for HMO PacifiCare Health Systems, but investors are biding their time and looking to grab the paper at a discount in the secondary market rather than chip in now. The thinking is that co-syndication agents UBS Warburg and Lehman Brothers and managing agents Bank of New York, BNP Paribas, and Wells Fargo Bank will be stuck holding large pieces of the deal. With hefty final allocations, there should be some heavy selling in the secondary market, one potential investor noted. "If the company doesn't turn around it may be as low as 80," she said. "Everyone knows the credit risk is high so they're waiting to see just how low it trades initially," she added.

Charter Communications' "B" paper traded at 991/2, which is slightly up for the name. Dealers said that Comcast Cable Communications' bid for AT&T's cable assets drove the sector, Charter included. "Charter is stronger on the bank of the Comcast potential acquisition of attractive cable assets," a dealer noted. "The multiple they are paying makes the entire sector look attractive." Charter, a domestic cable operator, is based in St. Louis, Mo. Company officials did not comment by press time.

Moody's Investors Service lowered the senior unsecured debt ratings of Reston, Va.-based competitive local exchange carrier XO Communications to Caa1 from B2 reflecting XO's performance to date and the company's revised guidance of expected future performance. The rating downgrade affects $800 million in credit facilities. Furthermore, Moody's has a negative outlook based on a belief that XO will be constrained in its ability to cover its future funding gap on acceptable terms from public debt and equity markets. Additionally, XO's revised business model may still be impacted by the general economic slowdown.

Palo Alto, Calif.-based CNF, watching the game of banking mergers and musical chairs, chose Bank of America to lead a new five-year revolving credit facility because of the personnel still in place at the bank. The B of A deal replaces one led by J.P. Morgan. "The banking community has changed considerably in the last five years," said Marc Thickpenny, v.p. and treasurer. "J.P. Morgan no longer exists as the same bank and so the top four or five lenders on the credit were asked to pitch for the new lead. Despite the mergers the people at B of A are the same people as four or five years ago. We also looked at who had provided the most credit over the years and B of A have done that." Since J.P. Morgan merged with Chase Manhattan Bank, the people and institution are very different, he said.

Credit Suisse First Boston has launched retail syndication of the $822 million credit for PSEG Power, just as the bank wraps up syndication of the heavily cut Mirant deal, which closed last week. The PSEG loan consists of an $800 million four-year construction facility priced at 1 3/8% over LIBOR. Commitment fees are 3/8%. There is also a one-year $22 million letter of credit priced at LIBOR plus 7/8% with a 15 basis points commitment fee.