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Moody's Investors Service downgraded the senior bank credit facility of UNOVA, Inc. to B2 from B1 in response to expectations that the company will have difficulty finding new financing commitments in light of its continued poor financial performance. The rating outlook for the Woodland Hills, Calif-based automative design and integration company is negative. The company will be looking to pay down its current debt in the near-term, but Moody's believes that a lack of adequate cash flow on hand could present challenges. UNOVA's bank facility was collateralized by domestic inventory, accounts receivables, intangibles, and equipment. A waiver allows the company to borrow up to $245 million under the credit line which has been fully drawn. Moody's insists the company establish a more permanent bank arrangement before January 2001, when the waiver expires as Moody's questions whether or not the company's $100 million in on-hand cash provides adequate liquidity for downside protection in the event that the company is faced with unforeseen set-backs. However, Moody's does note that management changes and programs have been instituted to achieve lower costs and new product rollouts. In addition, Moody's observed that the company continues to explore strategic alternatives for its businesses.

Moody's Investors Service will unveil today a default rate forecast of 9.5% for the junk market this year, and Credit Suisse First Boston is again taking the agency to task over its methodology. The heart of argument is over the relevance of macro fundamentals and the aging factor of bonds for predicting default rates, which Moody's maintains to key parts of determining forecasts. CSFB doesn't and is forecasting a high yield default rate of 5-5.5% for this year. The two players have a history of disagreeing, facing off last summer when the then Donaldson, Lufkin & Jenrette also came up with forecasts starkly different from the more bearish Moody's. "They are always bantering," says Ron Habakus, portfolio manager at Brown Brothers Harriman in New York. "CSFB along with Merrill Lynch have the most research on the sellside, and Moody's has all the default data--they're just vying for headlines," he adds.

J.P. Morgan Chase last week launched syndication of a $350 million facility on behalf of ACT Manufacturing, replacing $250 million of an existing bank loan and tacking on an additional $100 million of new money. The new $350 million credit will be divided between a $150 million revolving credit priced at LIBOR plus 3%, a $100 million term loan "A" priced at LIBOR plus 3%, and a $150 million term loan "B" priced at LIBOR plus 31Ž4%. Officials at Act Manufacturing did not return calls. J.P. Morgan Chase did not return calls. The Hudson, Ma-based company is a contract manufacturer of circuit boards and electrical cable.

A $5 million piece of Adelphia Communications' term loan "B" traded at 99 7/8, up slightly from previous levels, dealers said. "They got a lot of new capital, so the funding issues might've been resolved. People's fears may have subsided," a trader said. Another dealer said all of the cable names are being bid higher. "It's a recession-proof industry," he said. A market watcher said the stability in the high-yield market is having a positive effect on the bank market. He said Adelphia recently did some convertible issues. "It gives them additional capital and gives people a warm, fuzzy feeling," he said, also noting that stock prices from the middle of December to mid-January rose 100%, from 25 to 50. Two weeks ago, Adelphia traded up to 99 5/8, up from its previous level at around 99. The St. Louis, Mo., services a little more than six million customers.

Bank of Nova Scotia and Firtstar Bank have reportedly signed on to the $50 million add-on for Trend Technologies launched two weeks ago, according to a banker on the deal. CIBC World Markets led the deal with Deutsche Bank and FleetBoston Financial. The banker said a little over $40 million of the credit has been syndicated.

First Union this week will launch syndication of a $215 million loan for Chesapeake, Va-based Dollar Tree Stores.Eric Koble, cfo, said the credit facilities will consist of a $50 million, 364-day revolver and a $165 million, five-year End Loaded Lease Financing tranche. Initial pricing on the loan is LIBOR plus 60 and will be based on a grid tied to total leverage. Koble said commitments on the facility are expected by the third week of February. FleetBoston Financial will act as syndication agent and SunTrust Bank as documentation agent, he added. Koble explained the facilities will refinance the company's existing $135 million, four-year revolver signed in 1997 and priced at LIBOR plus 55 basis points.

Houston-based EGL, Inc. increased its 364-day $50 million credit to $150 million and extended its tenor to three years during its renegotiation of the facility this month. Elijio Serrano, cfo, explained that the company closed on the new Bank of America led credit three weeks ago after launching it in late October. "We just didn't want to go through the process every three years," said Serrano, explaining why the company decided to lengthen the tenor on the facility. Serrano said increasing the tenor on the facility did not present a pricing issue as the pricing did not change dramatically. "It increased slightly but not significantly," he said. Serrano said pricing on the new credit is LIBOR plus 87 1/2 % versus LIBOR plus 62 1/2 % on the 364-day. The company paid 250 basis points in commitment fees, he added.

Bankers expect Metromedia Fiber Network to come to market with a high-yield bond deal in lieu of syndicating the $350 million bank credit Citigroup underwrote for the company two weeks ago. A banker close to the deal said the company will issue debt off of its $1.5 billion shelf registration rather than syndicate the credit in response to the recent rally in the high-yield debt markets. "It's not an issue of pricing necessarily, but a high-yield deal provides them with more flexibility," he said, noting that many high-yield companies may opt for the bond market to avoid covenants associated with bank loans. "The company has no plans to syndicate or draw down on the credit or shelf," said an official at Metromedia. The official confirmed that if launched pricing on the credit stands between LIBOR plus 23Ž 4% and 3%. Citigroup declined to comment.

Montreal-based Canadian National Railway will tap the market for roughly $800 million to fund its upcoming C$1.2 billion acquisition of Wisconsin Central Transportation Corporation. Mark Wallace, director of investor relations, said the company is in discussions with Citigroup to lead the deal but has not made a final decision. Wallace said Citi has an inside track on the lead arranger role because Salomon Smith Barney advised the company on the Wisconsin acquisition. Wallace would not elaborate on structuring details regarding the loan. Officials at Citigroup did not return calls by press time.

The bid-offer spreads on the bank debt of Loews Cineplex and Regal Cinemas have been moving up to 79-84 and the low to mid-70s, respectively, as box office winners help out the industry, dealers said. "There's just better movies out now," said a dealer. "Movies are the product, so if good movies come out they make more money. Investors are also happier with their product and are feeling more secure." Another dealer said billionaire investor Philip Anschutz's interest in Regal's bank debt and move to take control of United Artists Theater Circuit is helping the levels. "It's driven a frenzy in the market, and certainly moved things up," he said, adding that he's doubtful levels will propel much further. "There's a lot of rumors floating around about Regal," said a dealer, declining to name specifics. "There are a lot of rumors of consolidation in all the theater names."

Dealers played a cat-and-mouse game with as much as $40 million of Integrated Health Services' bank debt last week, moving its price up about seven points. There were several small trades and reportedly a larger-sized sale of about $20 million, but dealers differed over amounts and timing to the point where some questioned whether the paper was actually changing hands. What is certain is that the bank debt of the bankrupt health care company was getting a lot of attention and prices moved up to about 38. Dealers attributed the activity to an improving industry, but even among its peers IHS got the most attention.

Ames Department Stores signed a deal for $800 million in senior secured financing with General Electric Capital to finance upcoming store expansions and for general operations. The credit replaces a $650 million facility that Bank of America previously led that was set to expire in June of next year. Rolando de Aguiar, cfo of Ames, said the company has larger inventory and capital expenses and that a new facility was needed to accommodate that. "This facility provides more flexibility and has a higher advance rate," he said. "It's been a tough year for retail, and we needed more flexibility. This facility gives us more stature and more fire power." De Aguiar said Ames is planning to add five stores this year. "As the economy strengthens, we'll pursue other opportunities," he said.