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Sun Healthcare's bank debt proved it also rises early last week, when the debt notched up to the 281/ 2 range after lagging in the low 20s for months. Traders couldn't pinpoint the exact reason behind the debt breaking through, but noted it was one of the credit's hardest hit by the health care slump. It was also among the slowest to recover when the market improved. Calls to the company were not returned by press time.

Another summer week, with corporate bond issuance sub $10 billion at $9.6 billion and the average deal size dropping $150 million to just $520 million. Despite the quiet tone, there were several notable deals, including a $575 million 10-year from Ba1/BBB- Dana, which priced at +395 bp over. The Dana deal, along with offerings from Humana, Pulte Homes and other low BBB borrowers indicates that the demand for crossover names is still strong as investors look to add yield to their books at historically wide borrowing levels. Higher quality borrowers continue to issue short-term to take advantage of low absolute yield levels as the 2Y Treasury hit its low for the year last week. The weighted average rating increase to A- for the week as larger deals from Citigroup and AIG SunAmerica skewed the average.

Bank debt for XO Communications notched up to 75 from 73 last week as the company bought back $500 million of its bonds through Citigroup. A bank spokesman declined to comment. XO, based in Reston, Va., is a competitive local exchange carrier. A spokeswoman did not return calls by press time.

Buysiders expect J.P. Morgan Chase to increase pricing on the $400 million term loan "B" of the $1.15 billion deal for Land O'Lakes as institutional players are balking at the LIBOR plus 2 1/2 % being offered. New pricing is expected to come in at LIBOR plus 3%. The market also expects the company to pull its plans to finance a $250 million bridge loan priced at LIBOR plus 2% as the company is now telling investors it will speed up its execution of a $300 million bond offering it planned for next year in the 144a market. "They know we like to see some [bonds] below us," commented one buysider on why the company has switched strategies mid-syndication. Calls to J.P. Morgan Chase and Land O'Lakes officials were not returned by press time.

Merrill Lynch launched a $250 million deal last week to finance the spin off Pitney Bowes Office Systems from parent Pitney Bowes. The deal comprises a fully underwritten $125 million revolver priced at LIBOR plus 2 1/4% and a $125 million term loan "B" priced at LIBOR plus 2 3/4%. Merrill, also advisor on the spin off, is offering 50 basis points on $15 million commitments to the revolver and 1/8% on commitments to the term loan. The deal is expected to be rated in the double B range by Standard & Poor's. The office systems business rents and leases fax machines.

Louisanna-Pacific has received $150 million in commitments on its $200 million pro rata bank deal since syndication launched two weeks ago. Bill Hebert, director of investor relations, said the company expects the remaining $50 million to come in before the end of the month along with the completion of a $200 million bond deal. To make the all-revolver deal more attractive to banks, Hebert said the company is simulataneously executing a bond deal through lead underwriter, Goldman Sachs. "Banks want to lessen exposure to this market [pro rata] so we had to go with a smaller revolver," explained Hebert, regarding the company's decision to replace its existing $370 million facility with $200 million in bank debt and $200 million in bonds.

Urban Shopping Centers is shopping for a $90 million construction loan and is talking to three banks about a deal. The Chicago-based retail real estate investment trust is looking to expand its upscale Houston Galleria mall by 700,000 square feet and is expected to hold a bank meeting at the end of the month, according to market players familiar with the deal. Gerald Egan, ceo of Urban Retail Properties, referred calls to a spokesperson who declined to comment.

Uncertainty surrounding the fate of PacifiCare Health System's $700 million credit last week created an eyebrow-raising 25-point quote range for the name as holders of the paper talked it up and potential buyers in distressed land did their best to knock it down. AgentBank of America last week was talking to the company's existing lenders to rework the $700 million credit, which was to be taken out by a $1.5 billion refinancing package. That plan was scrapped two weeks ago.

Aladdin Capital Management recently closed its first $400 million collateralized debt obligation--Landmark CLO I--after ramping up the vehicle for the last six months. Gilles Marchand, senior portfolio manager, said the fund decided to launch its first vehicle to diversify its investment grade portfolio and begin managing high yield assets. "We try to focus on borrowers that have assets with scarcity value," said Marchand, explaining that the fund primarily invested in cable, gaming, and broadcasting for the vehicle.

Several asbestos credits took a big jump last week, with dealers reporting more investor comfort with the liability issues surrounding these names. Crown Cork & Seal traded at 87 1/4 to 88, up from the mid-80s; Owens Illinois traded at 93 1/2 to 94 1/2, up from the 92 range; and U.S. Industries traded at 83, up from the high 70s. "The (liability) numbers have stabilized and investors are more comfortable with asbestos risk," a dealer noted. Another dealer said the strong fundamentals of Crown Cork gave the sector a boost, yet he cautioned that the names could trade back down in sympathy with the anticipated Chapter 11 bankruptcy filing of Federal-Mogul. Crown Cork secured a $400 million term loan in the wake of lowered ratings related to the company's asbestos exposure (LMW, 3/18). Calls to a spokesmen for Federal Mogul and Owens Illinois were not returned by press time. Calls to Timothy Donahue, senior v.p. finance at Crown Cork, also were not returned.

* KDDI Corp, Japan's second largest mobile phone company, is to launch what could become Japan's largest ever securitisation, secured on five office buildings owned by KDDI in different parts of Japan. The deal, which market participants expect to be launched by the end of the year, is being sized at around ¥200bn ($1.62bn), which is between 60% and 80% of the total value of the buildings it will be secured on.