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Source: Thomson Financial/Securities Data. For more information, call Rich Peterson at (973) 645-9701. BP SPRD. - basis point spread over Treasuries; FLT. SPRD. - basis point spread over floating index; Comb. - fee is combined; NR - not rated; Na - not available; n 144A // Manager responsible for running the books; Contains offerings of $2 million or more and includes only the portion of global deals distributed in the U.S.; * More managers, but not listed; JB - joint books; Ý estimated price.

James Investment Research is moving out of Treasuries and into MBS, as well as some non-callable agencies, on the view that the former have priced in too much good news and the latter could see spread-tightening as investors seek quality. Barry James, a senior portfolio manager for some $200 million in taxable fixed income, says MBS and agencies could tighten this year 50-100 basis points and 25-75 basis points, respectively. Treasuries may have over-rallied, now that it appears the budget surplus may not be as large as once anticipated. He says he may boost his MBS allocation from 10% of the total portfolio to 15-20% and the agency allocation by perhaps only a few percentage points by selling five- to 10-year Treasuries and buying MBS with maturities of 10 years or more, such as 30-year Ginnie Mae 61/2%s. Keeping to lower coupons such as this will also help protect him from the expected boom in refinancing. James says if he sees a pullback in rates of 25-30 basis points he would look to extend duration out to about six years from its current 5.5 years via the Treasuries-MBS swap. The duration of the portfolio's benchmark, the Lehman Brothers Government/Credit Index, is 5.54 years. The Alpha, Ohio-based firm's portfolio is allocated 46% to Treasuries, 36% to agencies, 10% to MBS and 8% to corporates.

This chart, provided by Citibank/Salomon Smith Barney Inc., tracks bid-ask prices for par credit facilities that trade in the secondary market. It also tracks facility amounts, ratings, pricing and maturities. This information is based on sources which we believe to be reliable but has not been independently verified. Accordingly, Citibank/Salomon Smith Barney and its affiliates do not assume responsibility for, and do not make representations or warranties (express or implied) as to the accuracy of the information. This information sheet does not constitute an offer to sell or a solicitation of an offer to purchase any securities or other instruments described herein.

Some European industrial junk credits are now trading above par while others remain in the high 80s and 90s, a disparity that has high-yield pros disagreeing about whether credit issues or technical factors are driving the prices. "It is all technical," argues David Newman, high-yield research analyst for Salomon Smith Barney in London. He points to the fact mutual bond fund inflows into the U.K. market hit $644 million for last week. With few new issues, those flows tend to head toward recognized names. "There are the largest inflows since June, 2000," he adds. Credits such as Alfa Laval, Grohe Holding, Ineos Acrylic and William Hill are trading around 106, while BSN Financing and Isco .are in the low-90s. Frank Ferrantelli, head trader for CIBC World Markets in London, sees the trading opportunities, as does Newman, who believes the reason for the trading disparity is because investors are flocking to familiar names in reaction to the volatile fourth quarter of last year. He points out that the similarly rated Premier Foods' 12 1/4% notes of '09 (B3/B-) is yielding 13.9% while William Hill's 10 5/8% notes of '08 is yielding 9.75%. "Why not sell William Hill and buy Premier, taking out 12 points of money and a downward yield of 430 basis points?"

Recent corporate spread tightening following the Fed funds rate cut is being touted by some market players as indicative of a mature market where investors are able to anticipate events months before they happen. In the mid-1990s the lag effect between the positively correlated Fed funds rate and corporate spreads could be as much as two years. But market reaction to the Fed's recent 50 basis points of easing immediately tightened spreads 20-40 basis points, says John Kollar, corporate strategist at HSBC Securities in New York. "[This is a] structural change associated with a more mature corporate bond market," he adds. Milton Ezrati, strategist and economist at Lord, Abbett & Co. in New York, agrees the corporate market has matured, but unlike Kollar, he considers the speed with which spreads narrowed just a sigh of relief from a market heavily apprehensive of a slowing economy and a looming recession. "The market was in the midst of a near panic when the Fed eased," says Ezrati.

After selling $70 million in mortgage pass-throughs to buy five and 10-year Treasuries six weeks ago, the United Bank of Kuwait Asset Management is considering reversing the trade and selling Treasury paper to beef up its MBS exposure by $40 million. Mortgage pass-throughs have cheapened as investors have become worried about prepayments, says Robert Friend, portfolio manager of $1 billion worth of taxable fixed income in London. He adds MBS is lagging behind 5- and 10-year swap spreads and represents an historically good value. The yield curve manager is 5% long its duration relative to the J.P. Morgan Global Bond Index, which has a duration of 5.8 years. Friend is slightly bearish and will neutralize the duration once Treasuries trade up about 5 basis points, giving the 10-year a yield of 5.06%. "We need discipline, because if yields back up because the market gets ahead of the economy, we don't want to have to give back all the profits we've made off of being long," says Friend. Seventy-five percent of the portfolio consists of government paper, including Canada, Australia, Japan and Europe, with 20% in U.S. agencies and the remaining 5% in investment grade corporates.

Up-front fees on pro rata tranches ticked down slightly but are still within arm's reach of last year's annual high of 4.2 basis points. According to Portfolio Management Data, for the rolling three months ended Dec. 31, 2000 pro rata fees tip-toed down to 4.0 basis points for every one million dollars committed. Fees on institutional pieces remained steady at 2.3 basis points, which was the same for last November (LMW, 11/13/00). Marc Auerbach, associate at PMD in New York, said not much has changed in the dreary, credit-sensitive loan market. "The story is much the same. There's not a large deal volume," explained Auerbach. He added that leveraged deal volume for December wilted down to $19 million from November's $36 million. He attributed the small dip in fees to a handful of richly priced telecom deals missing the three-month radar. "It's a rolling three-month average, so some of the small, highly leveraged telecom deals have dropped off our average, which probably accounts for the slight down-tick. Small, leveraged pro rata deals are what's keeping the spreads up," explained Auerbach. One such deal is Goldman Sachs' $250 million credit for Network Plus. The Quincy, Mass.-based telecom company paid 61/2% over LIBOR to expand its network back in October last year.

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.