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Charlotte, N.C.-based MedCath Corporation, an operator of cardiovascular hospitals and mobile cardiac labs, has tapped Deutsche Bank and Bank of America to lead an upcoming $220 million credit facility. David Crane, president and ceo, said that First Union and J.P. Morgan Chase will be secondary leads on the credit, which will run concurrent with an equity offering. Syndication of the deal will launch sometime in the summer once the initial public offering is completed, he said.

Bell Microproducts, Inc. recently signed a $175 million credit facility to pay down notes that are maturing next month and raise working capital for potential acquisitions. The facility expires in two years. Eli Sayegh, director of investor relations, said bank debt financing offered the most flexibility for the company. "We've been working on this for months. The one-year notes were due at the end of June, and we wanted to get this over ahead of that," he said. "Equity was out of the question; stock is too cheap at this level. This made the most sense. It gives us flexibility to tap into this as needs came up."

High-yield portfolio managers say the dearth of single-B junk issuance--credits in the middle of the junk ratings ladder--has them sitting on money that they'd like to invest in companies that are slightly less creditworthy, but which would offer more yield. High default levels have prompted a flight to quality, so that issues below rated below double B have become scarce. Single-B issuance for the first quarter comprised 48.5% of the market, the lowest level since 1996, and issues rated triple-C or lower were 16.6%, the lowest percentage of the total since 1993, according to Marty Fridson, chief high-yield strategist at Merrill Lynch.

Deutsche Bank is set to lead a bankruptcy exit facility for Harnischfeger Industries, Inc. in the coming weeks, as it emerges from bankruptcy. The $350 million four-and-a-half-year secured revolver is expected to close in the first half of June, said Kenneth Hiltz, senior v.p. and cfo of the Milwaukee, Wisconsin-based manufacturer of surface mining equipment. Pricing and the date of the bank meeting have not been finalized, he noted. The spread will be based on the total amount of leverage, ranging from LIBOR plus 2-3%, he said.

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.