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Lenders to the middle market are looking to form clubs on credits as the number of players in the market decreases and institutional buyers lose interest in the deals. Market sources predict that banks such as FleetBoston Financial, Heller Financial, and First Union, will have to increase the amount of deals they co-underwrite in order to combat a reduction in the number of banks playing in the market and a pullback by institutional buyers from deals they see as illiquid in the secondary market. With fewer buyers, lenders are looking to share exposure so they do not end up holding too much. Officials at FleetBoston Financial declined to comment. Officials at First Union did not return calls.

Market conditions are said to favor mainstay telecom names, with a number of trades reported last week and levels inching close to par. Nextel Communications' "D" paper traded up to 99 3/4 in a $5 million trade, while same-sized piece of VoiceStream Wireless' "B" tranche traded around 99. A dealer said that the "B" tranche was 99.50, while the "D" was bid at 99.625 and was bid stronger. "The institutional market is still flush with cash and the primary is not filling the appetite at the moment," he noted. "I would expect to see the on-the-run credits continue to perform well from a trading perspective."

Potomac Electric Power Co. (PEPCO) may raise up to $1 billion via a bank facility or a bond issue or to partially finance the $2.2 billion purchase of Conectiv's electricity business, which it announced last week. PEPCO has not lined up any banks to lead the financing, Tony Kamerick, treasurer in Washington, D.C., told Power Finance & Risk, an LMW sister publication. Kamerick explained the company would consider Merrill Lynch, which advised on the acquisition, but said, "It is not locked to anybody." Pricing as well as flexibility are some of the criteria it will consider in its bank selection.

Adrian Hyde, managing director and co-head of credit derivatives trading at Chase Manhattan in New York, has left J.P. Morgan, under which most credit derivatives activity from Chase has been subsumed following the merger between the two firms. "I'm assessing my options now," he said, noting that he's looking to stay in credit derivatives.

St George Bank's $1bn global securitisation of its Australian residential mortgages is on course for launch next week via Credit Suisse First Boston. The deal will test the wisdom of splitting the triple-A portion into fast and slow pay tranches. Some ABS professionals believe this structure carries the risk that unless the shortest tranche is priced exceptionally tightly, it can push out spreads on the longer tranches to maintain a yield curve.

The floodgates opened this week on the wave of large convertible issues that had been expected from markets such as Taiwan and South Korea. The first two transactions of 2001 from north Asia emerged this week in the form of a $175m issue from Acer Communications, arranged by Salomon Smith Barney, and a $200m deal from Quanta Computer managed by UBS Warburg. The smaller $85m Chunghwa Picture Tubes CB was priced late last week. Demand was very strong for the new zero coupon issues and they traded up in the secondary market.

Australia Commonwealth Bank of Australia is raising A$700m through the sale of preferential exchangeable resettable listed shares that are being distributed by bookrunner Salomon Smith Barney, alongside co-lead manager Commonwealth Securities.

Bankers report solid institutional demand for the forthcoming Austereo IPO, but say there is some price sensitivity in the book. The deal looks likely to price in the lower half of the A$2-A2.40 range, because investors believe the company might be near a cyclical high in terms of advertising revenue and audience ratings.

Japanese finance company Orient Corp (Orico) is preparing to securitise the subordinated tranches that it retained when it brought its six international securitisations of auto loans - the Oscar series. The concept is a highly unusual one in international structured finance, and the ¥23bn deal, lead managed by Mizuho Securities, will be the first of its kind in Japan.

ORIX New Zealand Ltd, a subsidiary of finance company ORIX Australia Ltd, this week priced the first securitisation in Australia or New Zealand to be backed by the residual value and maintenance risk of auto operating leases. The NZ$98.4m deal was lead managed by Macquarie Finance (NZ), the New Zealand subsidiary of Macquarie Bank.

The Singapore domestic debt market showed signs of revitalisation this week with two companies making debut bond issues. Domestic company Singapore Airport Terminal Services (SATS) arranged a S$200m three year issue from its debut, newly created S$500m medium term note programme, while Bank of America slipped into the market with a S$100m 10 year bond, its first in the Singapore market.

Mirvac Group is preparing to launch the largest CMBS issue to date in Australia. The listed property trust is seeking to totally refinance its bank borrowings, by launching A$500m of commercial mortgage backed securities (CMBS) within the next six weeks.