NEW YORK, April 1 (Reuters) – The U.S. commercial paper market shrank for a third straight week as companies continued replacing very short-term debt with longer maturity corporate notes and bonds, Federal Reserve data showed on Thursday.

As corporate bond markets extend last year’s spectacular rally back from their nadir in the financial crisis and investors reembrace risk, companies and banks are increasingly able to sell longer-dated corporate debt instead of commercial paper. That shift is curbing the size of the overall commercial paper market, analysts say.

Recent trends suggest that “commercial paper is moving sideways amid the terming out of debt: the shift to selling longer maturities,” said Tony Crescenzi, market strategist and portfolio manager with Pacific Investment Management Co. (PIMCO) in Newport Beach, California.

For the week to March 31, the size of the U.S. commercial paper market, a vital source of short-term funding for companies’ day-to-day operations, slipped $5.2 billion to $1.109 trillion outstanding from $1.114 trillion the previous week.

The overall U.S. commercial paper market is about half its peak size of about $2.2 trillion outstanding in August 2007 when the credit crisis began.

Money market funds, which are big participants in the market, have been selling commercial paper recently, deterring the market from growing, analysts say.

As risk appetite continues to rise in the aftermath of the global financial crisis, some investors in money market funds have been switching into riskier, higher-yielding assets such as corporate bonds and stocks.

NEW YORK, March 31 (Reuters) – U.S. junk bond sales hit a record this quarter as investor demand for riskier assets continued to recover in the aftermath of the global financial meltdown, data showed on Wednesday.

High-grade corporate bond sales also rose, though not to the levels seen in the boom years of hefty borrowing by companies and banks that preceded the credit crunch, which began in mid-2007.

U.S. first-quarter junk bond sales soared to $61 billion, the biggest-ever quarter since records began in 1980, and up from $11 billion in the same period a year ago, according to Thomson Reuters data.

“We have seen a tremendous amount of volume with a stronger equity market underpinning that tone,” said John Cokinos, head of high-yield capital markets with Bank of America Merrill Lynch.

Lower-rated companies that issue junk bonds are keen to refinance existing debt while market conditions are favorable. Issuers can sell debt at very low borrowing costs compared with the rates of near 20 percent they would have had to pay at the height of the crisis in late 2008. Many junk bonds now yield less than 10 percent.

“I don’t see the pace of issuance slowing next quarter. There is so much money (going into) bond mutual funds and there is so much demand for these securities,” said James Cox, managing partner at financial planning and asset management company Harris Financial Group in Colonial Heights, Virginia.

He said companies were taking advantage of cash supplies to buy their debt.

NEW YORK, March 26 (Reuters) – Proposed reforms for the financial system should reduce the extent of risk-taking by the biggest U.S. banks and may bolster their ratings, Fitch Ratings said on Friday.

The debate is intensifying over legislation for the banking system designed to avert another global financial crisis. Although the final form of changes to the laws is uncertain, indications of the broad effects it may have on banks are becoming clearer, Fitch said.

“In the near term, reforms are expected to reduce the risk profile of the industry and most particularly the risk profile of the largest U.S. banks,” Fitch said in a special report on U.S. financial institutions. “This would generally imply positive credit rating implications.”

A bill crafted by Senator Christopher Dodd, chairman of the Senate Banking Committee, won approval at the committee level on Monday by a narrow vote. Dodd now must secure the backing of a handful of Republicans for proposals to overhaul the U.S. financial system.

“The recasting of the regulatory framework has now taken center stage,” Fitch said.

Current discussion of proposed reforms “is the most substantive phase in the response to a crisis, as it crystallizes more durable and potentially more far-reaching changes,” Fitch added.

The Dodd bill includes new rules to maintain the stability of the financial system, regulate debt instruments that have been blamed for contributing to the credit crisis, and protect consumers from risky financial products.

/NEW YORK, March 25 (Reuters) – Labor unions are pushing for greater worker protection and added scrutiny of executive pay at companies in bankruptcy, but restructuring professionals fear the changes might force more companies to liquidate rather than reorganize.

Congress is considering a bill backed by unions that proposes to raise the limit on wage claims in bankruptcy, make it harder to change collective bargaining agreements, and limit the ability of companies to shed retiree benefits.

The bill also proposes what one critic called nearly “impossible to satisfy” restrictions on bonus and incentive payments for executives of bankrupt companies.

The proposals are not new, and the bill, The Protecting Employees and Retirees in Business Bankruptcies Act, is still in committee in the House and Senate.

However, unions are hoping to give the bill fresh life following the recession, the outcry against Wall Street pay and the financial hit suffered by thousands of workers and retirees whose benefits have been shed in bankruptcy court.

“When people look at the 2008 collapse on Wall Street and financial system reform that everyone says needs to take place, and they look at abuses of financial firms and … CEO pay and bonuses when they wreck the company, this is thematic with that,” said Thomas Conway, international vice president of the United Steel Workers of America.

Bankruptcy, he said, “shouldn’t be a financial stunt designed to screw retirees or employees or creditors just because you can.”

NEW YORK, March 25 (Reuters) – The U.S. commercial paper market shrank for a second straight week, hinting that companies may still be cautious about the pace of economic growth, Federal Reserve data showed on Thursday.

Firms typically use commercial paper to restock shelves in anticipation of consumer demand and to pay wages. Many have been trimming commercial paper issuance as they slow the pace they add to inventories, for fear the U.S. economic rebound might run out of steam, some analysts say.

Recent shifts in the commercial paper market “are linked to a slowdown in the inventory rebuilding cycle that we saw in the second half of 2009,” said Howard Simons, strategist with Bianco Research in Chicago.

For the week up to March 24, the size of the U.S. commercial paper market fell by about $7.9 billion to $1.114 trillion outstanding from $1.122 trillion the previous week.

In addition, money market funds, which are big participants in the market, have been selling commercial paper recently, eroding the market’s size, said Tony Crescenzi, market strategist and portfolio manager at Pacific Investment Management Co. (PIMCO).

As risk aversion subsides, some investors in money market funds have been switching into riskier, higher-yielding assets such as corporate bonds and stocks, analysts said.

A surge of corporate debt issuance over the past year has replaced some of the short-dated commercial paper debt companies and banks might otherwise have sold, limiting the size of the commercial paper market, strategists add.

NEW YORK, March 24 (Reuters) – Bankrupt U.S. chemicals maker Chemtura Corp <CEMJQ.PK> and its creditors are fighting claims from a California public interest group that says it is owed $9 billion to compensate the public for alleged injuries from toxic chemicals.

In a court document filed earlier this week, the company said the group, the Council for Education and Research on Toxics (CERT), previously known for taking legal action against Burger King Holdings Inc <BKC.N> and McDonald’s Corp <MCD.N> for the contents of french fries, is not a creditor.

The CERT originally filed its claims in October.

Chemtura filed for bankruptcy protection last year, listing assets in excess of $3 billion.

CERT filed claims on Oct. 30, 2009, seeking $9 billion in total for the “public interest” due to injuries allegedly caused by previously produced chemicals.

Last month, Chemtura’s Creditors’ Committee filed an objection to the claims, which the company has now joined, on the grounds that CERT is not a creditor and does not have a basis to make its claims, they say.

“The claims should be disallowed in full because CERT is not a creditor as defined by the Bankruptcy Code,” Chemtura said in court documents filed on Monday.

NEW YORK, March 18 (Reuters) – The U.S. commercial paper market contracted in the latest week, hinting that companies may be cautious about the pace of economic growth, Federal Reserve data showed on Thursday.

Companies borrow in the commercial paper market to restock shelves and pay wages, so increased use of this short-term financing is one indicator of how much demand they expect for their products in the months ahead.

“A theme that may be at large here is the fact that inventories are not going up and they may be still going down for some industries,” said Ray Stone, economist with Stone & McCarthy Research Associates, in Princeton, New Jersey.

For the week to March 17, the size of the U.S. commercial paper market, a vital source of short-term funding for companies’ day-to-day operations, fell $22.4 billion to $1.122 trillion outstanding from $1.145 trillion a week earlier.

After peaking at about $2.2 trillion in August 2007 when the credit crisis began to unfold, the market shrank to about half that level. Although it started to expand late last year, it remains at a low ebb and is still not definitively growing.

Commercial paper “just doesn’t seem to be getting out of these very low levels,” said Kathleen Stephansen, chief economist at Aladdin Capital Holdings in Stamford, Connecticut.

The market’s weakness may partly reflect a nagging worry among some investors about the risks of not getting repaid, she said.

NEW YORK (Reuters) – A bankruptcy judge said on Wednesday Lehman Brothers Holdings Inc <LEHMQ.PK> could delay until mid-April filing a detailed disclosure statement for its proposed plan to end its bankruptcy.

The disclosure statement, which is a necessary step for Lehman to get creditor approval for its plan, would detail Lehman’s current state of affairs and provide financial information to creditors.

Judge James Peck approved Lehman’s request for a delay at a hearing in U.S. bankruptcy court in Manhattan on Wednesday.

Lehman, which filed its reorganization plan on Monday, sought a 30-day delay so it could include recent findings by Lehman’s court-appointed examiner, among other things.

The reorganization plan to repay creditors would create a business called LAMCO that would manage Lehman’s long-term commercial real estate, private equity, and other illiquid assets.

Harvey Miller, Lehman’s lead bankruptcy attorney, said in court on Wednesday that it is planning to start “intensive” meetings with creditors to negotiate over its reorganization plan “very quickly.”

“There’s enormous pressure from (Lehman chief executive Bryan) Marsal, who is very anxious that we move forward and get this train out of the station,” Miller, an attorney at Weil Gotshal & Manges, told the court.

NEW YORK, March 16 (Reuters) – Distressed debt restructurings are expected to increase this year among midsized U.S. companies as credit begins to flow more freely to smaller borrowers, a report says.

The revival in the corporate debt and loan markets has mostly benefited larger borrowers, noted the restructuring report by the investment bank Morgan Joseph & Co.

“In contrast, middle market borrowers have seen only a fraction of the recovery witnessed by their larger counterparts and therefore may be primed to be the largest beneficiaries of increased credit demand in 2010,” the report said.

Because the minimum for a high yield or “junk” bond issue is about $150 million, many smaller firms rely mostly on bank loans for funding instead, making borrowing more expensive, the report said. Yet investors’ appetite for distressed debt is growing as markets continue to recover.

That resurgence of demand, combined with an expected increase in mergers and acquisition activity, will likely help more midsized companies restructure their debt later this year, said James Decker, managing director and head of the financial restructuring group with Morgan Joseph in a telephone interview with Reuters on Tuesday.

“We see that better day coming,” he said. “As credit markets loosen, that should be accompanied by an increase in M&A activity,” Decker said. As markets improve, companies may be able to sell units “or raise equity capital to reduce the overall debt level,” he added.

At the same time, the price of bank loans has climbed so that many would no longer be considered distressed. Many are now trading above 90 cents on the dollar, up from a bottom near 50 cents on the dollar about a year ago, said Decker, who coauthored the report.

NEW YORK, March 15 (Reuters) – Swoozie’s Inc, a maker of luxury gifts and stationery that filed for bankruptcy just weeks ago, will put itself up for sale at an auction on March 25, the company said on Monday.

Hudson Capital Partners, a liquidator, has put in a bid to buy all of the company’s assets for about $5.3 million, which will be a lead bid at the auction, Swoozie’s said in a press release.

Swoozie’s is still searching for buyers to continue to operate the business, but if the company cannot find one at the auction, Swoozie’s will be liquidated.

Swoozie’s got court approval to sell all of its assets on March 10 from U.S. Bankruptcy Judge C. Ray Mullins of the U.S. Bankruptcy Court for the Northern District of Georgia, the release said.

The company filed for bankruptcy protection on March 2, saying it was hurt by the underperformance of recently acquired Blue Tulip stores in the Northeast.

Swoozie’s, which was founded in 2001, operates 43 locations in 15 states and has 350 employees, according to the company.

The company has said it has had “in-depth discussions” with at least nine strategic buyers starting in late 2009, and that it has contacted more than 40 possible investors, liquidators, private equity firms and possible industry buyers about a potential deal. (Reporting by John Parry; Editing by Maureen Bavdek)