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Duke Street Capital, manager of a EURO800 million CDO--the largest on the continent to date-- is expected to launch the sale of the notes for the deal this week. A source close to the deal said CIBC World Markets will be coming to market with notes supporting the manager's Dutchess I CDO S.A. Pricing on the tranches could not be determined. The vehicle will comprise 65% loans and a 35% combination of mezzanine and high yield debt. The CDO is a regular cash-flow arbitrage deal launching into a market described by the source as favorable in terms of the spread differential between the assets and the bond debt.

Houston-based El Paso Energy Partners, a provider of mid-stream gas services in the Gulf of Mexico, has closed a $600 million, three-year revolving credit facility with J.P. Morgan Chase. The deal comes on the back of a private offering of $250 million of 10-year, 8.5% senior subordinated notes, said Sandra Ryan, director of investor relations. "El Paso has an aggressive expansion plan that includes spending $500 million per year on acquisitions and growth over the next five years," she said, declining to be more specific on potential targets.

The commercial mortgage-backed securities market has yet to see the influx of capital it expected from investors gravitating down the credit curve, a move widely forecast after the Department of Labor granted long-awaited exemptions to the 1974 Employees' Retirement Income Security Act, according to BW sister publication Real Estate Finance & Investment. The exemptions, which were approved last year, allow pension funds to invest in credits as low as BBB-. Previously pension funds were restricted from investing in anything below a single-A rating as well as prohibited from investing in financial asset securitization trusts. Anecdotal evidence suggests that although there has been more interest in these securities from investors that previously were barred, there has been nothing along the lines of what was expected (BW, 5/29/00).

McLeodUSA Inc.'s bank debt, defying gravity, made a surprise showing in the 97 1/2 range last week, with dealers marveling at the high point for a credit in a beleaguered telecom industry. Traders said $7.5 million had traded, and levels have since notched down to the 95 1/4 range. Calls to company officials were not returned by press time.

CIBC World Markets and Merrill Lynch have been selected to lead the proposed credit backing the buyout of Yell Corp., by private equity firm Hicks, Muse, Tate & Furst and Apax Partners & Co. A banker familiar with the situation said that British Telecommunication, which owns the phone directory business that includes Yellow Pages, may not proceed with the sale or it will be at a heavily discounted price.

Merrill Lynch is reorganizing its fixed-income research division to combine high-yield and investment-grade coverage in several sectors. The move is a response to a market which has seen an unusually high number of "fallen angels," or credits recently downgraded to junk status over in recent months, and the expectation that those credits or others may recover and move in the opposite direction. "Having investment grade separated from high yield is less tenable in the current environment than it was five years ago," says Thomas Sowanick, co-head of fixed-income research.

Harley Bassman, a 16-year veteran of Merrill Lynch's fixed-income options trading area, most recently as a managing director on the firm's OTC debt options desk, is the firm's new head of the real estate structured finance department. Bassman says this breaks down into running the firm's North American CMBS, MBS and ABS trading and sales efforts. He would not comment on why the change was made. While this is a new title within the mortgage trading operations he has effectively replaced Greg Odland, a 15-year Merrill veteran, whose new brief has yet to be determined, according to Odland. Odland, who came to MBS trading from the government trading desk several years ago, would not comment on why the shift occurred, but did note that he is planning on staying at Merrill. Bassman says that he is planning on growing certain areas within the MBS operation, but would not disclose which desks, nor provide a timeframe. Bassman will report to Tom Likovich, head of debt markets trading and sales in North America.

On the heels of the wildly successful Suiza Foods deal, First Union is back with another food/dairy deal, as a $210 million acquisition credit for Dairy Farmers of America is in the market. The credit backs its acquisitions of milk producers, Crowley Foods and Marigold Foods. First Union has reportedly offered agent slots to BANK ONE, Rabobank and Harris Bank. Exact agent titles could not be determined by press time. Calls to officials at Dairy Farmers of America were not returned by press time.

Moody's Investors Service assigned a B3 rating to Tokheim Corporation's reorganized debt obligations, following the company's emergence from Chapter 11 bankruptcy on Oct. 20, 2000. The rating affects $47,765 million new guaranteed senior secured revolving credit facility with a final maturity of September 2005. The company is based in Fort Wayne, Ind., and manufacturers gas pumps.

A $1 billion bond deal is said to be helping Nextel Communications's bank debt levels by providing liquidity. Several small trades totaling $20 million were reported last week, with levels topping off at 97 before settling at 95 1/2 to 96. Still, Nextel's bank debt is one of the most actively traded names, and dealers cautioned not to entirely rest the levels on the bond deal. "It should be marginally positive in my view and I would expect levels to firm," he noted, "but it's largely a technical at the moment." Calls to the company were referred to investor relations and were not returned.

SK Corp and Citic Pacific launched international bond issues this week to buoyant investor demand. Korea-based SK Corp's $250m senior unsecured Eurobond issue ended up three times oversubscribed and subsequently tightened 15bp in secondary markets.

ANZ Banking Group completed its $1bn global RMBS transaction this week, pricing its jumbo class of triple-A notes at 18bp over three month Libor. Lead managed by Salomon Smith Barney (SSB), the issue achieved the tightest spread among recent Australian global deals for a single amortising tranche. It also came at the tight end of price talk that was 18bp-19bp last week.