Securitization People and Markets

Appleton Capital Management, a Dublin-based commodity trading advisor with $110 million under management, will launch a fixed-income arbitrage hedge fund on September 1, according to BW sister publication Alternative Investment News. The Appleton Fixed-Income Opportunity Fund will be run by Stephen Lane, previously a trader at ABN AMRO, says Jeremy O'Friel, head of marketing. The fund will mostly trade European and U.S. investment-grade corporate debt, he added.

Bonds of merchant energy companies were lower last week following news that Duke Energy, an investment-grade credit that many believed would stay free from scandal, engaged in round-trip trades to artificially boost trading volumes.

Nextel Communications gave the market the best news it has had in some time with an extremely positive earnings call last Tuesday, which traders described with strongly- worded adjectives such as "heroic." The 9.375% notes of '09 (B3/B) went as high as 72, before settling at 68 by Thursday afternoon. They started the week at 59.5. Other wireless bonds also got a lift on the news. The Airgate PCS 13.5% notes of '09 (Caa1/CCC) were up four points to 28.

Citigroup Asset Management released the former Smith Barney Asset Management taxable fixed-income management team last week, a 12-person operation that oversaw some $7.5 billion in assets and included 14 mutual funds. Mary Athridge, a firm spokeswoman, says the move will cut costs and makes sense given the current downturn, though the Smith Barney group was in no way bleeding assets. No further moves are planned at this time, she says.

Deutsche Bank has hired Nicholas "Trip" Mestanas as head of Pass-Through trading. Mestanas resigned from Goldman Sachs last week where he was also head of Pass-Through trading. A person close to the situation says he was likely start at Deutsche Bank late last week. Mestanas could not be reached. John Sobol, head of mortgage-backed securities trading at Goldman, and Fred Brettschneider, head of MBS at Deutsche Bank, did not return calls.

Deutsche Securities in Tokyo, part of the Deutsche Bank group, has hired Yukio Egawa as head of Japanese securitization research, a newly created position. The position was created to complement the securitization business Deutsche Securities is building in Japan, a firm spokeswoman says. Egawa joins from Credit Suisse First Boston in Tokyo where he covered securitization as well as financial institutions and government-sponsored agencies. He reports to Karen Weaver, managing director and global head of securitization research.

A pair of sell-side gaming analysts are urging high-yield investors to add to their holdings in the sector. They predict a rally when second quarter earnings announcements kick off this week with Boyd Gaming. Jacques Cornet, analyst at CIBC World Markets, says gaming credits have traded off of late because money managers are liquidating assets to pay back investors fleeing high-yield and its telecom-related woes. He expects many gaming companies to easily beat analysts' estimates, and recently upgraded the sector from "market weight" to "outperform."

Andy Hay resigned last Monday from Morgan Stanley, where he was a senior high-grade corporate bond salesman, according to a person at the firm. The reason for his resignation could not be determined, and Hay could not be reached. Dennis Burns, Morgan Stanley's head of corporate bond sales, did not return calls.

A high-yield portfolio manager believes the bonds of Charter Communications are ready to begin climbing back, but a trader at another buy-side firm is not convinced. Brendan White, portfolio manager at Fort Washington Investment Advisors in Cincinnati, purchased some of the bonds last week. He says Fort Washington was never fully invested in the bellwether high-yield cable company, which was one of the priciest names in high-yield just a few months ago. "We had a small amount of exposure and were adding to it when the bonds ran away, so we never had a chance to build a real position," he says. He confesses that, "luck is the operative word," as to why he did not take a beating with the rest of the market on the name. White says Fort Washington worked out the value of Charter's assets and decided that the bonds were a bargain at last week's levels. "They've got the size. They're the most built out, and have the most updated technology [in the cable sector]," he says. Charter's 10.75% notes of '09 were bid at 69 last Thursday.