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Murray Johnstone International is adding Japanese and euro-denominated government bonds on the view that the economic slowdown in the U.S. has not been fully discounted, and that these bond yields will reach their 1998 lows. "There is still a strong correlation between global bond markets, so as the U.S. yields drop it will take the other country's yields lower as well," says Rod Davidson, who manages $750 million in taxable fixed income. Davidson will bring his Japanese government bonds to neutral from 4% underweight, and will add 8% to his European government paper by selling his sterling-denominated long bonds because he considers them too rich, with the U.K. currency overvalued versus the euro. On the view that yields will be dropping all along the curve, he has been adding duration, recently purchasing the German 6.5% of '27 Bunds.

Buysiders say they are still feeling the effects from the consolidation on the sell-side, such as the recent mega-mergers of Donaldson, Lufkin & Jenrette with Credit Suisse First Boston and Chase Securities with J.P. Morgan, on accessibility to market information and liquidity. They have lost leverage with the sellside as a direct result of consolidations, says Mike Dineen, portfolio manager at the MONY Group in New York, and liquidity has also been effected. "I used to have more control over which firm I could reward, depending on who gave me better service. Now they are all just the same sellside," says Dineen. "It's almost like they've become commoditized," says another buysider.

A spate of trades came in the cable sector last week as dealers noted the industry's insulation from economic swings. There were several trades for Charter Communications and Adelphia Communications last week. A $4 million piece of Adelphia's "B/C" paper traded at 995Ž 8, while Charter "B" tranche traded at 995Ž 8, traders said. Both are up slightly from the 99 range. "Cable names are all stronger; it's counter cyclical," said one. "The industry is not dependent on the economy. Even in a downturn, people still keep their cable, while people may not be getting a new car." Another dealer agreed, jokingly remarking that cable television is one of the last things to go as the economy nosedives. "Cable is usually the last thing to go--that and beer," he said. Adelphia, based in Coudersport, Penn., services five million customers. Charter is a St. Louis-Mo. Company with a little more than six million customers.

Moody's Investors Service assigned a provisional rating of (P)Ba3 to the proposed $275 million senior secured credit facility of Chesapeake Energy Corporation. The rating also came out in conjunction with an upgrade on the company's senior implied rating to B1 from B2 and an upgrade on its $31 million cumulative convertible preferred stock to Caa from Ca. The anticipation of a decrease in debt during 2001 from free cash flow bolstered by up-cycle price hedges prompted the positive outlook from Moody's.

CIBC World Markets is building up its European high yield desk in London. Alasdair MacLean, previously of Donaldson, Lufkin & Jenrette, was hired at the beginning of this month as a senior research analyst covering manufacturing and utilities. He will join Philip Volpicelli, who covers industrials and consumer products. Prior to the hire, Volpicelli had coverage duties for all sectors save for telecom, where the desk has three dedicated analysts. Vincent Moge, who left ING Barings six months ago, has also joined CIBC as a salesman, and will report to desk co-heads Frank Ferrantelli and Denis Loubignac. "Most places don't have more than four or five salespeople, so our manpower is similar to that of other desks," said MacLean. Additional hires will be dependent on how rapidly the market expands, he added.

Woodbury, NY-based Comforce, Inc. signed a $110 million, three-year credit facility led by IBJ Whitehall earlier this month, replacing the $75 million, five-year credit the company signed in 1997 led by Heller Financial. Harry Maccarrone, cfo, said the company sought to increase its $75 million credit to finance general corporate expenses, to buy back existing bonds and have flexibility on the acquisition front. Maccarrone said the company switched banks to avoid impending higher pricing by Heller. "The old loan had comparable pricing but they were looking to increase it," he said. The single-tranched new credit is priced at LIBOR plus 250 basis points with a commitment fee of 50 basis points, he said.

Alliance Atlantis Communications closed a $500 million credit facility this month to fund broadcasting acquisitions in the coming fiscal year. Paul Laberge, senior v.p. of corporate development and general counsel, explained that the company's planned acquisitions include Women's Channel Network as well buying interest in the Family Channel and SportsNet. "Broadcasting has been our biggest area of growth over the last five years, better than production distribution," he said. Alliance, based in Toronto, Ontario, is a major Canadian production company and movie distributor, with operations in television, film, broadcasting and the Internet.

FleetBoston Financial and Dresdner Bank Real Estate are in the market with a $255 million construction loan for the development project backed by three companies, according to Real Estate Finance & Investment. Lend Lease Real Estate Investments, Westbank Projects and Starwood Hotels have tapped the three banks for a fully underwritten deal for a 1.4 million-square-foot mixed-use development in Bellevue, Wash., bankers said. Lead banks Fleet and Dresdner are seeking eight to 10 banks to round out the syndicate. The banks held a meeting at the construction site last week. Bankers at Dresdner, Fleet, WestBank and Starwood officials did not return calls, while Lend Lease officials declined to comment.

Within the collateralized debt obligation community a philosophical difference has emerged between CDO managers and bond buysiders. CDO managers are taking issue with the notion of CDOs as vehicles for vacuuming up undesirable credits, viewing them instead as leveraged funds. Buysiders, on the other hand, see the structured products as liquidity providers, particularly for lower rated credits.

Moody's Investors Service downgraded Kellogg Company's senior unsecured debt to Baa2 from Aa2 in anticipation of the company's acquisition of Keebler for $3.8 billion in cash, plus the assumption of $555 million in existing Keebler debt. Kellogg is expected to obtain permanent long-term financing for a large portion of the acquisition financing within six months following the transaction. Keebler's bank credit facility will be cancelled following the acquisition, and the rating will be withdrawn. The acquisition will nearly triple Kellogg's debt. Despite the significant increase in debt, Moody's expects Kellogg to continue to direct a large portion of its internal cash flow to cash dividends as opposed to debt reduction. The rating also reflects Kellogg's exposure to the highly competitive, slow growth ready-to-eat cereal business. Supporting the rating is the relatively faster-growing cookie and cracker business to Kellogg's portfolio. Keeblers holds the number two U.S. market share in cookies and crackers. Calls to Thomas Webb, cfo for Kellogg, were referred to a spokesman, who did not return them by press time. Kellogg is headquartered in Battle Creek, Mich.

Houston-based Newfield Exploration is in the market with a $300 million, three-year credit facility to help fund the $333 million purchase price of Lariat Petroleum. The balance of the deal will be financed with stock. J.P. Morgan Chase and Bank of America are lead arrangers on the credit. Susan Riggs, treasurer, said she expects the facility to close oversubscribed in the next couple of weeks. "There are currently nine banks in the syndicate, but we expect more," she said.

Credit Suisse First Boston has been tapped to lead a $2 billion construction and acquisition credit revolver for Minneapolis-based NRG Energy, according to a banker familiar with the deal. The proceeds of the revolver will be used primarily to acquire assets from LS Power, Sierra Pacific, Conectiv and Wisconsin Energy (PFR, 1/22).