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Williams Companies, an operator of natural gas pipelines and a communications network based in Tulsa, Okla., successfully issued $1 billion in debt that market observers said was heavily oversubscribed. But there are some skeptics who passed on the credit because of questions over Williams Communications, the heavily indebted network provider 85% owned by Williams Companies. Williams Companies is planning to spin off the single B-rated subsidiary by August, but according to Mike Dineen, portfolio manager at MONY Life Insurance in New York, with market volatility it may be difficult. Because of the possibility of having to support the subsidiary with parent company cash flow, Dineen wouldn't touch the credit: "They have a lot of financing risk, because an IPO of Williams Communications is predicated on a receptive equity market. I

Baxter Capital Management is looking to swap some of its agencies and Treasuries for the bonds of cyclical companies, such as carmakers and manufacturers, which could see spread-tightening if the economic downturn proves to be less severe than some have predicted. James Herreman, a v.p. who oversees approximately $400 million in taxable fixed income, says it's premature to forecast a recession on the basis of poorly performing stock markets and earnings warnings. He acknowledges economic activity has fallen off, but notes the unemployment rate, for one, remains "extremely low." As a result, he believes spreads on cyclical corporate bonds could tighten over the next six to twelve months. He is unsure how much he will ultimately allocate to cyclical corporates. Herreman and his team, who have not yet identified any particular credits, would look to make moves a couple million dollars at a time out of five- to 15-year agencies and Treasuries and into corporates with similar maturities, so as to remain slightly long the 4.51-year Lehman Aggregate. The Indianapolis-based firm's Lehman Aggregate portfolios are allocated roughly 38% to MBS, 26% to corporates, 19% to agencies, 8% to Treasuries, 6% to ABS and 3% to cash.

The move by Wayne, New Jersey-based G-1 Holdings, formerly known as GAF Corporation, to file for bankruptcy last week because of asbestos claims has sparked fears among bondholders of its subsidiary, Building Materials Corp. of America, that the assets and liabilities of both the entities may be combined. Building Materials has no asbestos liability and is not involved in the bankruptcy proceedings, but if consolidated it could be made liable and may be unable to payback bondholders. "I have been reassured by lawyers that this cannot happen unless both companies file for bankruptcy, but I've heard it from other investors, so the theory is definitely out there," says Shawn Curley, analyst at Imperial Capital Management in Los Angeles.

Toronto-Dominion Bank is about to wrap syndication on its $250 million loan for Stillwater Mining, a syndication some officials familiar with it said was very slow. The lead agent has collected $155 million in commitments, which does not include TD's own hold of $40 million. "Single mine risks were the main reasons why people declined," said one banker on the deal, referring to inherent industry problems. James Sabala, cfo in Denver, would only say, "Syndication is proceeding accordingly. We expect to close the deal early during the quarter." The new credit backs the mining company's expansion of a Montana mine and will also take out existing debt. Officials at former lead arrangers Bank of Nova Scotia, Deutsche Bank and Barclays Capital did not return calls seeking comment. A TD official declined to comment. Stillwater is based in Denver.

Teligent Inc.'s bank debt dipped slightly last week, falling to 50 from an earlier bid level of about 55. Dealers last week differed over whether any of the paper actually changed hands, but all agreed levels are down after bumping up to 55. The competitive local exchange carrier is based in Vienna, Va. John Wright, cfo, referred calls to a spokesman, who did not return them by press time. Late last year Teligent's bank debt traded down to 53 after the company released disappointing earnings figures and took cost-cutting measures including eliminating jobs (LMW, 11/27). Dealers characterized the CLEC industry as struggling for new subscribers. J.P. Morgan Chase leads the deal for the $800 million credit facility, which breaks down into a $65 million revolver as well as two term loans of $535 million and $200 million. A bank spokesman did not return calls for comment.

Jim Paulsen, chief economist and chief investment officer at Wells Capital Management in Minneapolis, is BondWeek's Interest Rate Forecaster of the Year for the second time in three years. Paulsen, who bagged the prize for 1998, says the Federal Reserve's preemptive "war" on what it perceived to be inflation, as well as a little luck, made it easy to call the rate rally that landed him the top slot. He reasons that the Fed's demonstrable concerns about inflation had "talked up" yields to unsustainable levels, and that the year-end rally was merely a healthy and necessary retracement to fair values. Paulsen made his rate calls (see chart) at the beginning of 2000 based largely on the fact that he did not see the ability for companies to pass on substantial price increases for goods and services. "We would have seen some of that in the CPI reports going back at least to mid- to late-1999, and what we saw was actually deflationary," says Paulsen. He admits to a concern that he had guessed wrong about mid-year when the price of a barrel of oil started to spike but he relaxed when he realized it was merely a distribution problem, more than a structural disturbance in the supply-demand equation. He notes that going forward, the price of a barrel of oil was likely to settle into a range between the mid- and upper-$20s, placing it right where it was in the middle of the last decade, when oil fears were practically non-existent. Paulsen sees it as ironic that the one sector of the economy that is arguably most responsible for the white hot GDP growth of the past several years-high-tech-is largely insulated from interest rate gyration, keyed as they are to issues like bandwidth capability and international chip demand. He anticipates it will be "perhaps two, maybe three years" before tech firms will begin to grow again, but until then, he notes, "all the easing in the world won't jump start revenue growth."

BNP Paribas and FleetBoston Financial have signed onto Credit Suisse First Boston's $256 million credit backing the leverage buyout of Collins & Aikman Floorcoverings (CAF), according to a banker familiar with the deal. BNP committed $50 million and earned the syndication agent slot, while Fleet took documentation agent. Fleet's commitment could not be verified by press time. Heller Financial has committed $15 million to the term loan "B," and opted to shy from the revolver. "Buying the revolver would have been an accommodation," said one lender familiar with the matter. He declined further comment. Another banker remarked, "[The revolver has] been the tougher piece to sell, but I heard it's oversubscribed." Both officials declined further comment. Heller reportedly netted 1% in up-front fees. CSFB is offering titled agents 1% and $50,000 in up-front fees, according to the banker. A Heller official did not return calls seeking comment. A Heller official did not return calls seeking comment. The credit is structured as a $50 million, six-year revolver, a $60 million, six-year term loan "A" and a $146 million, seven-year term loan "B." Pro rata pricing is linked to a grid based on CAF's leverage. The spread opens at 31/4% over LIBOR. The "B" tranche stays at 33/4% over LIBOR.

An auction of Warnaco Group's bank debt failed last week, with bids falling below the 65 asking price. Dealers pointed to rough times in the textile industry and a legal fight between the company and Calvin Klein as reasons for the divide between buyers and the seller. "I don't think the bids will go above 54," one market watcher predicted, with another adding, "They wanted 65 for it, when it's going into the 50s." Industrial Bank of Japan was reportedly the seller, but officials there did not comment by press time. A Warnaco spokesman said he's unaware of any trading in the bank debt. "Under the current structure the company would get notice if there was a trade," he said, declining further comment.

UnitedAuto Group has secured an additional $130 million to add to its existing credit facility, which now totals $706 million, to back acquisitions. "The company is in acquisitive mode. We just wanted to have the ability to pursue acquisitions as the opportunities come up," said Jim Davidson, v.p. of finance, adding that the company has no specific acquisitions in the works. He emphasized that the financing agreement is routine for the Detroit, Mich.-based company, which purchases new- and used-automobile dealerships throughout the country, with a heavy concentration in Detroit and Connecticut. Penske Corp., a controlling shareholder, made a $23 million investment in UnitedAuto in exchange for 2.1 newly-issued common shares at $10.75 per share. UnitedAuto operates 126 franchises in 17 states, Puerto Rico and Brazil. Davidson described the covenants as standard. The facility is set to expire in 2007.

A $250 million credit facility for InterGen Ltd. is set to clear the market with a novel pricing scheme that features a grid linked to Bechtel Enterprises Holdings' and Shell Generating's ownership in the company. Betchtel and Shell are equal partners in Intergen, and as either or both divest from InterGen, the spread rises accordingly. Georganne Proctor, cfo of Bechtel in San Francisco, said the company is not involved in any similarly structured financings with its other subsidiaries. "This structure is not duplicated anywhere else," she said, refusing further comment. Mark Takahashi, v.p. and treasurer of InterGen in Boston, did not return calls seeking comment. The credit, which was due to close as LMW went to press last Friday, is led by Credit Suisse First Boston, Deutsche Bank and Australia New Zealand Bank. Rival bankers said the structure is new. "I haven't seen something like that before. It sounds like it would be a smart thing," noted one banker. "To the extent that people derive comfort from these two large companies, the banks are willing to lend to InterGen."

Bank of America will bring to market a $470 million loan backing the buyout of Michael Foods, according to a banker familiar with the financing. The buyout will be led by Vestar Capital Partners and Goldner Hawn Johnson & Morrison, and includes Michael Foods management and the Michael family. Michael Foods is a Minneapolis-based diversified food processor and distributor. Officials at Vestar and Goldner did not return calls. John Reedy, cfo, and Mark Witmer, assistant treasurer, did not return calls seeking comment. B of A will seek managing agents in early February. Rabobank will also have a titled role in the deal, according to a lender familiar with the matter. He declined further comment. Commitment sizes and fees have not been finalized, according to the banker familiar with the deal. The loan will be rated after a $200 million bond issue, which will be completed during the first quarter. The bond offering will take out a $200 million bridge loan that B of A has also underwritten. Pricing and other underwriters could not be ascertained before press time.

Laidlaw Inc. secured a $100 million bridge facility this month while the company restructures its $1.7 billion credit facility, on which it defaulted late last year. The facility can be broken down into $50 million in letters of credit. "Because of the nature of the business, in many cases you require letters of credit for a performance bond," said Geoff Mann, v.p. finance. The company issues performance bonds on a regular basis. The $1.7 billion facility is frozen and the company expects to have restructuring completed in March, when the bridge facility expires. The $100 million covers operating expenses over the next two months, Mann said. Laidlaw, based in Burlington, Ontario, is a transportation provider in the public school system, and owns Greyhound Lines. The bridge facility has several covenants that relate to cash flow and earnings before interest, taxation, depreciation, and amortization (EBITDA). "Given that we're in default, there are many covenants. We're talking pages of them," Mann said. There are no tranches: pricing is at LIBOR plus 41/2%.