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A highly competitive and heavily regulated industry poses tough challenges for Genesis Health Ventures, according to a Moody's Investors Service report rating the company's new $415 million senior secured credit facilities. The credit, which is in syndication, has been assigned a Ba3 rating. Russell Pomerantz, v.p. and senior analyst, factored in the number of nursing homes when considering the rating. "It's a large, highly fragmented industry. There are tons of choices," he said. Genesis, headquartered in Kennett Square, Penn., provides eldercare in the eastern US through a network of Genesis ElderCare skilled nursing and assisted living facilities. Also factored into the rating is the litigious environment of health care in the state of Florida. "Florida's prohibitively expensive for large corporate nursing homes," Pomerantz said. "Lawyers go after the big companies. Some have left the state or sold to smaller companies that don't have deep pockets. In Florida there are no reforms that limit the size of settlements." Pomerantz added that this is a factor that affects all health care companies and he knows of no large settlements against Genesis in recent memory. Bolstering Genesis' position is the company's significant reduction of debt, which happened while the company was in a Chapter 11 reorganization. Genesis is reemerging from bankruptcy with $600 million in debt, compared to $2.5 billion when it filed. "They went on a large acquisition binge in the late 90s, but they're one of the first health care companies to come out of bankruptcy and their balance sheet is in good shape."

A financing package with few strings attached won Credit Suisse First Boston the lead on a $700 million debt package funding Roadway's $475 million acquisition of Arnold Industries. Dawson Cunningham, executive v.p. and cfo of Roadway, said the company had no previous relationship with CSFB, but the firm stood out because "they were very responsive to needs during negotiations." He explained that CSFB had very limited contingencies that would undo the financing. The firm, he said, provided a binding commitment that could only be unwound due to extremely adverse changes, basically in the economy. Material adverse change clauses are common in merger deals, and lenders will invoke them when a deal might get too sticky. He declined to name the other banks considered or that bid for the business. CSFB acted as adviser to Roadway and Morgan Stanley was the adviser to Arnold on the transaction. The financing will include a $200 million revolver, but Roadway and CSFB have not finalized the remaining elements of the financing, Cunningham said. "It will be a mix of three different forms of financing, with the possibility of a bank term loan, corporate bond offering and then possibly an asset-securitization." The revolver will fund working capital needs and the $500 million will go toward acquisition financing. Roadway is waiting for ratings, he explained, though he could not provide a timeframe for a decision or comment on what the likely amounts would be. Officials at CSFB declined to comment. Cunningham predicts that Roadway will receive an investment-grade rating. Roadway has no debt currently, said Cunningham, and has been debt-free since 1996. The acquisition is expected to close by the end of the year pending shareholder approval from Arnold. In the first part of the two-step acquisition, Roadway will pay $21.75 cash for each share of Lebanon, Pa-based Arnold. That part of the deal is valued at about $552 million. After Arnold Industries purchase is completed, Roadway will sell back Arnold's logistics unit back to the division's management team for $105 million.

GE Capital is planning to syndicate a $700 million debtor-in-possession credit line for Ames Department Stores, after the troubled discount retailer filed for Chapter 11 bankruptcy protection. A banker said that the $700 million revolver will be syndicated, though he was unable to provide pricing or a timeframe. GE Capital spokesman John Oliver declined to comment on the loan. Calls to Ames CFO Rolando de Aguiar were referred to a spokeswoman for Ames, who confirmed that GE Capital would be providing a $700 million credit line and Kimco Funding would provide $55 million. The Ames spokeswoman said the company has received interim approval from the bankruptcy court for its $755 million post-petition financing. The interim approval immediately makes available to the company up to $628 million to acquire merchandise, fund daily operations, pay its associates and retire the existing credit agreements. A hearing on the final approval of the financing is set for Sept. 17, 2001.

Stephen Stonberg has joinedJ.P. Morgan Securities as a managing director in London to head up its credit derivatives effort in Europe. He joins from Deutsche Bank in London, where he was head of repackaging and portfolio swaps restructuring. A J.P. Morgan executive in London was uncertain whether this was a new position, or if not, who Stonberg replaced. Stonberg will report to Jonathan Laredo, the head of structured finance for Europe and Asia, and to Bertrand des Pallieres, head of rates marketing. Stonberg resigned from Deutsche Bank three weeks ago, according to a London asset-backed banker. Des Pallieres was on vacation and could not be reached for comment. Laredo did not return calls. J.P. Morgan's spokeswoman in London, Eileen Darko, declined comment.

Level 3 notched down another level when it traded last week at 78-79 last week in a single swap. Dealers continue to fault sector problems on the bank debt's continual slide. Buyers and sellers could not be determined by press time. "There's nothing new [on the credit]; it's all related to telecom problems. The bonds have moved around," said a dealer. Yet there may be a sign of steadying for the credit, as traders added that the levels have stayed within a range for a while. Level 3 is based on Broomfield, Colo., and operates more than 20,000 miles of intercity fiber-optic networks in the U.S. and Europe. Arthur Hodges, spokesman at Level 3, declined to comment. Sureel Choksi, cfo, was traveling and could not be reached for comment. Dealers have named the company as among the most hit by the telecom issues. "The problem with it is the distribution of services is taking too long, which is upsetting customers and affecting the bottom line," noted one. Level 3 has a $675 million deal that was signed in March. J.P. Morgan leads the deal.

United Defense Industries' bank debt traded down to 99 5/8 last week in a $5 million trade, down a meager 1/4 from previous levels. The buyer and seller could not be determined. The company, which has a longstanding business relationship with the U.S. Armed Forces, is considered a safe bet even in a slower economy. "There's consistent demand for the industry, and military spending influences what they do," said a dealer. United Defense, based in Arlington, Va., manufactures combat vehicle training systems. Doug Coffey, spokesman, was unaware of the trading levels, but remarked, "That doesn't really affect us. That's the banks' concern." Buzz Raborn, cfo, declined to comment on trading levels. "We just refinanced, so there's nothing to report right now," he said. The company has an $800 million credit arranged by Deutsche Bank and Lehman Brothers. The deal breaks down into a $200 million revolver and a $500 million term loan "B" and a $100 million term loan "A." This replaces a $725 million credit arranged in 1997 through Lehman, Deutsche Bank and Citicorp.

Finally a summer week. Just $6 billion in debt came to market the week ended August 23, with virtually all of it investment grade issuance. Although it was a generally slow week, there were several notable deals, including the $1 billion 10-year for International Paper. Given the difficulties in the paper cycle, the fact that IP could place $1 billion of debt near the tights of the year indicates the depth of the bid for cyclical BBB paper. A steep yield curve has pushed investors down the credit quality spectrum and out the curve in search of yield. At the same time, the aggressive Fed action (7 cuts in 8 months) has given investors more comfort taking these credit bets.

Deutsche Bank has hired London-based asset-backed securities banker Michael Jinn. He joins after a one-year stay at Merrill Lynch. Prior to working with Merrill Lynch, Jinn worked at Deutsche Bank for two-and-one-half years. Jinn's new title is director in the European ABS group. Michael Raynes, who heads the group from London and to whom Jinn reports, says that the position is newly-created. Raynes says his bank may add another ABS trader, but on the banking side, future hires will happen on a more opportunistic basis. Jinn says he decided to rejoin Deutsche due to the boom in the global ABS business, and because he thought Deutsche offered a great platform.

Spreads on bonds of investment-grade paper and forest product companies should beat other industrials over the next three months, according to Akiba Cohen, an analyst at Morgan Stanley, andInstitutional Investor's top-ranked basic industries analyst in the most recent All-America Fixed-Income Research Team survey. Cohen expects the sector, which traded 40-45 basis points wide of the Morgan Stanley Industrial index early last week, to beat the index by 10 to 15 basis points over the next three months. He cites the positive slope in pulp futures prices and relatively low July increase in inventories for North America and Scandinavia as reasons to be bullish about the sector. He also believes that much of the recent merger and acquisition activity has run its course or is in its final stages, allowing companies to focus on debt reduction. Specific credits he recommends because they have finished, or soon will finish, acquisitions and begin to pay down debt include Georgia Pacific (Baa3/BBB-), Domtar (Baa3/BBB-) andBowater (Baa3/BBB).

A rash of asbestos credits moved up last week, as dealers noted increasing comfort with liability issues. Crown Cork & Seal hit the high 80s from the mid-80s. A $10 million piece of Owens-Illinois' debt traded in the low 90s and a $5 million piece of USG traded into the low 70s from the high 60s. Dealers said the asbestos fear that triggered a downgrade in levels last fall is starting to clear. "The genie is back in the bottle. People are more familiar with the liability issues," said a market player. "At first, the potential losses [from lawsuits] were off the chart." Calls to Timothy Donahue, cfo of Crown Cork, were not returned. Calls to David Van Hooser, cfo of Owens, were referred spokesman Phil McWeeny, who did not comment by press time. Calls to Richard Fleming, cfo of USG, were not returned by press time. Dealers have said that with most of the companies filing for Chapter 11, bankruptcy protection helped them restructure and protected them from mounting liability. Meanwhile, players had time to regain confidence in the credits. USG, which recently filed, has seen an uptick in levels ever since. "People are taking the view that it's going to be a bumpy ride, but that it's worth it to stick it out because of the market share these companies have, meaning they're long-term players," a dealer said.

Beazer Homes USA is replacing its revolving line of credit and has retained BANK ONE as its lead bank. The $200 million revolver replaces a $250 million line of credit that is set to expire in November 2002, a BANK ONE banker said, declining to be named. Beazer Homes reduced the size of the line because it does not need the full capacity after completing a $200 million senior notes offering in May, he added. The lender is seeking eight to 12 banks to round out the syndicate and held a meeting at Beazer's headquarters in Atlanta last Wednesday. Beazer will use the line for general corporate purposes. David Weiss, cfo, at Beazer, was attending an outside meeting with other finance officials at the company and could not be reached. BANK ONE is committing $30 million and will be acting as administrative agent and sole lead arranger. The bank has not yet received additional commitments nor has it set commitment fees. The best efforts deal is expected to close in September, the banker noted. The three-year, unsecured revolver is priced at LIBOR plus 13/4%. Pricing on the previous unsecured line was slightly lower, at LIBOR plus 155. "This is primarily due to higher market pricing relative to last time they re-did the revolver," the banker explained.

Bedford, Mass.-based filtration and purification technology provider Millipore is talking with its lead banks, FleetBoston Financial and ABN AMRO, about refinancing its current $175 million revolving credit agreement. Janet Frick, assistant treasurer for Millipore, said the loan matures in January and this is the primary reason for arranging a new revolver. She declined to comment on whether the same banks would lead the facility, but she said a new loan would be syndicated rather than just rolled over with existing banks. The BioScience market is dynamic and following the separation of the microelectronics division of Millipore, Moody's Investors Service has upgraded the company's bank debt rating from Ba2 to Ba1, said Frick. Millipore is definitely looking to get improved conditions, she added, but declined to say whether this would be through pricing or covenants. The existing revolver was originally $450 million, Frick noted, reduced to $250 million and then $175 million recently. Millipore is not looking to upsize it again, she said. The company spun off its microelectronics division through an IPO this month to create Mykrolis.