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Bank of America's $150 million credit for apparel retailer Ann Taylor is reportedly oversubscribed after two weeks in the market, said bankers, who noted the credit is supposed to close early next week. CIT Group and Transamerica have reportedly come in with commitments on the credit as well as co-syndication agents J.P. Morgan Chase and First Union and documentation agent FleetBoston Financial. Fees are 25 basis points for $30 million commitments, 20 basis points for $20 million commitments, and 10 basis points for $10 million commitments.

Bayou Steel signed a $50 million revolving credit facility with Congress Financial Corp., replacing a $40 million deal that was due to expire this month. The new deal provides liquidity for a company with negative cash flow, said Richard Gonzalez, cfo. "The facility is larger because we have inventory and receivables to support that. We went for more money to give us more flexibility," he said. Bayou Steel, based in LaPlace, La., operates a steel mill and a stocking warehouse on the Mississippi River.

Flowers Foods is looking for a flex down in pricing on the company's $150 million "B" tranche, but institutional buyers said they would have to reconsider their commitments to the credit if the company succeeds in getting lead arranger Deutsche Bank to make the move. The $380 million credit launched two weeks ago and was reportedly three times oversubscribed in one day. The bank's easy sell to a market hungry for food credits--especially well priced BBB-/Ba2s--caught the attention of James Woodward, cfo at Flowers. "We are asking them to reduce pricing," said Woodward, declining to comment on Deutsche's response or to elaborate more fully regarding possible structural changes to the deal. He explained that such a frenzy for the deal may mean shaving off 25 basis points may not reduce fervor among investors.

Buysiders got their wish for more "B" debt on the DaVita, Inc. deal as Credit Susisse First Boston and Bank of America upsized the $175 million "B" piece to $200 million, downsizing the $175 million revolver to $150 million and the original $75 million term "A" to $50 million. Buysiders had been clamoring for an increase to the "B' tranche (www.loanmarketweek.com , 4/6). But with the change investors in the oversubscribed "B" piece will now only receive LIBOR plus 23/ 4% rather than the original price of LIBOR plus 33/ 4%, as the pricing flexed down. Rich Whitney, cfo, did not return calls.

Deutsche Bank has reportedly received $200 million in commitments for the $325 million pro rata piece of its $475 million senior secured deal for Manitowoc Company, Inc. French bank, Natexis Banque Populaire, Bank of New York, First Star and State Bank of India, are among the syndicate, noted a banker. Commitments of $25 million and $15 million to the pro rata receive upfront fees of 62.5 basis points and 37.5 basis points respectively. Carl Laurino, assistant treasurer at Manitowoc, could not be reached for comment by press time. The "B" tranche was three times oversubscribed and pricing flexed down by 25 basis points to LIBOR plus 2 7/ 8%.

Market pros are explaining the ballooning spreads on WorldCom bonds over the last several weeks as a reaction to the expectation it will announce a big ticket bond offering of as much as $10 billion, perhaps as soon as this week. They expect the company to try to take advantage of what observers say was last week's generally positive earnings announcement, and what has lately been a positive climate for high-grade telecom paper. Though outstanding credits have taken a beating already, players expect spreads to widen further once the new deal finally comes to market.

The Federal Reserve is getting industry requests to nail down a specific point in time--preferably soon--when it will reconsider its merchant banking capital rule. Under the rule banks would have to hold capital on a sliding scale linked to the amount of its equity investments. On April 16 the Securities Industry Association "strongly urged the agencies to set a specific date by which they will re-examine the need for these external capital charges." SIA, which has a commercial bank as well as Wall Street members, would prefer that bank internal models determine how much capital should be allocated to cover merchant banking risks.

An auction last week resulted in a $45 million trade of Finova Group's bank debt at 81. Bank of Nova Scotia was reportedly the seller. A spokesman did not return calls. Bear Stearns was rumored to be the buyer, but dealers there declined to comment. According to market players, the credit was highly bid for at the auction. Dealers said levels were up from 79 two weeks ago and traded at 81 1/2 in the Street at $5 million. While traders say the credit is still viewed as attractive, once Finova hits a certain level, it becomes harder to trade. "There's still a little deal risk; once you get in the 80s, it's tough," said one, adding that investor Warren Buffett's interest in the name has been the sole drive behind the levels. The Phoenix, Ariz.-based company offers financial services to small and mid-sized companies.

Fleet Retail Finance, the asset-based lending unit of Fleet Boston Financial, is seeking commitments to fill a $365 million credit facility for Hudson, Ohio-based Jo-Ann Stores, Inc. Don Tomoff, v.p. finance for Jo-Ann, noted that the facility was launched on April 25 and syndication is expected to close within the next two weeks. Some commitments are already in, he noted, declining to provide figures or name other banks involved.

Market appetite for energy credits has pushed up levels for Dresser Equipment's term loan "A" and "B" and dealers said as much as $50 million changed hands last week. The term loan "A" traded at 1001/ 4 and the "B" paper traded at 1001/ 2, as lenders left with skinny allocations cashed out. Dealers explained that when final allocations get so small that it is not worth the administrative work, lenders will sell paper back to the agent at a profit. "Nobody wants $1 million as a credit; it's too much to manage," one trader explained. Dealers taking 1/8 or 1/4 on each trade are generally happy to oblige.

As tough as the corporate credit deterioration has been on bank loan quality, it is not as severe as it was a decade ago, according to a recent report by Moody's Investors Service. John Lonski, chief economist at the ratings agency, noted that bad loans at banks are rising, with non-performing assets at the 19 major banks included in a first quarter sample, rising to $24.9 billion at the end of March, from $22.5 billion at the end of 2000. One bank, that Lonski declined to name, plans to exit from lending to the telecommunications, energy and mining sectors, further contributing to a rise in NPA's relative to outstanding loans. As a percentage of loan losses, NPAs jumped from 54% in the first quarter of 2000 to 70.2% at the end of March.

Moody's Investors Service has upgraded Teterboro, N.J.-based clinical lab testing business, Quest Diagnostics, Inc.'s $1.325 billion senior secured credit facility from Ba3, to a near investment grade Ba1. "Moody's is comfortable with the performance of the company, particularly the integration of SmithKline Beecham's clinical trials operation and the improved cash flow," noted Russell Pomerantz, v.p., senior analyst for Moody's.