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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.

Mariner Post Acute Network's debt notched up to 70 in a few small trades last week. Deutsche Bank was rumored to be active in the name, although traders there would not comment. Dealers say the uptick in levels is reflective of a recovering health care industry. "Medicaid is paying higher reimbursements, which should be improving the price of all health care names. Everything is being bid up," said a dealer. Mariner is a long term care provider based in Atlanta. Bill Straub, acting cfo, declined to comment. The company has a $1.09 billion deal that breaks down into five tranches. Pricing is based on a grid and starts at LIBOR plus 4%. J.P. Morgan and Bank of America are the lead arrangers, according to Capital DATA Loanware.

Moody's Investors Service has downgraded the senior subordinated notes and revolving credit ratings of industrial cutting tools manufacturer Simonds Industries, citing the historic lows the timber industry has hit, forcing many mills to shut down to reduce inventory. The revolver rating has been moved from B1 to B3 and the notes to Caa2 from B3. Simonds has reported poor operating performance along with weakened credit protection measures and Moody's expects further weakness in both the manufacturing and wood industries. In addition, the strength of the dollar has made the company's overseas sales less price competitive, while aiding several of its European competitors entry into the U.S. market. As of June 30, Simonds was in default of several covenants in its senior revolving facility, though an amendment has been agreed to. * Moody's has downgraded the ratings of Montgomery, Ala.-based Blount, including the $440 million of credit facilities from B1 to B3. Blount is a sporting ammunition business and industrial and power equipment manufacturer. The downgrades reflect poor performance and weakened credit protection measures, aggravated by its high leverage and weak balance sheet. The sluggish economy has battered Blount, with income declining by 40% from a comparable period last year. The industrial and power segments of the company, which manufactures equipment for the timber industry has been affected by the downturn in the paper and pulp industries. Blount's own manufacturing facilities are running at about half of capacity. The ammunition business has been affected by price erosion in the competitive law enforcement market with sales in the first half of this year down 24% from last year, according to Moody's. Management is anticipating a good hunting season in the coming fall, but Moody's believes that the gloomy economic outlook may dampen hunting-related spending. Blount's management has responded with cost-cutting measures, including plant closure, temporary layoffs and outsourcing of certain corporate functions. * Moody's has downgraded San Jose, Calif.-based Condor Systems' $50 million senior secured credit facility to Caa1 from B1, prompted by the company's announcement of non-compliance with financial covenants. The covenants were violated due to sharply lower reported earnings, as the company recorded significant program cost--to complete growth on several multi-year fixed contracts. The company, which provides advanced signal collection and electronic countermeasure products for electronic warfare, indicated that the interim covenant waiver obtained in April expired Aug. 15, and it expects to obtain additional waivers. A financial advisor has been hired and Condor is evaluating alternatives for debt restructuring. As of June 30, there was no available commitment under the facility, though $31.1 million of the borrowings were letters of credit. Customers include most of the U.S. intelligence agencies and military services and a number of foreign governments.

In an outspoken and lengthy comment letter, the New York Clearing House Association urged the Federal Reserve to use regulatory flexibility to make its big, newly proposed Regulation W less restrictive and "more workable with respect to the myriad transactions engaged in the course of modern banking." The first target for its criticisms was the proposed Reg W's prohibition on a bank's engaging in any new transactions with affiliates at all if at the time it already had transactions aggregating at an amount exceeding 10% of the capital and surplus of the bank. This would be a whole new limit, said NYCHA, going beyond the 20% ceiling permitted by statute. The Clearing House took issue with the Fed on several of the new Reg W's limitations on what constituted collateral for purposes of affiliate transactions. The Fed said that securities issued by the bank itself were not eligible collateral, nor were intangible assets nor letters of credit. NYCHA had disagreements with all these positions. On another subject NYCHA tangled with Reg W over the purchase of low quality assets. "The proposal would appear to contain an absolute prohibition" against buying them from affiliates. The Clearing House pointed out that the law permitted an exclusion from 23A for such purchases and suggested it be enlarged.