A financial subsidiary of agribusiness giant Cargill Inc. has established a new collateralized debt obligation issued by Wayland Investment Fund.

The $600 million fund will include a portfolio of public and private high-yield obligations and bank loans and may also invest in distressed debt, public and private equities, and other so-called "special situations."

It is among the last of about $5 billion of such obligations to close in the fourth quarter, bringing 1997's collateralized debt market to a new high of about $50 billion in volume, up from $12 billion in 1996, according to Moody's Investors Service.

Collateralized bond and loan funds like Wayland, and other institutional investors such as insurance companies and mutual funds, rose to prominence in some segments of the bank loan market in 1997 and now account for 37% of the highly leveraged loan market, according to Portfolio Management Data.

The fund's manager, CFSC Wayland Advisers Inc., will use the services of Minneapolis-based Cargill Financial Services Corp. to run the portfolio.

Privately held Cargill is an international marketer, processor, and distributor of agricultural, food, financial, and industrial products with 79,000 employees in 72 countries and business activities in 100 more. A company spokeswoman declined to comment on the new fund.

Observers noted Cargill's experience in investing in several asset classes though CFSC, especially its Value Investment Group, which is best known for investing in distressed assets.

"Cargill overall has been actively involved in origination and management of financial assets for a long time. This group in particular, the Value Investment Group, has been involved in these types of assets at least since 1987," said Tracy Pridgen, a senior director in the loan products group of Fitch IBCA.

"They've been looking at what's been going on in the structured finance area, and they decided that 1997 would be the year they got in," he added.

The Wayland fund is expected to build up its portfolio over the next nine to 12 months with mostly high-yield bonds and leveraged loans. Given the managers' experience with distressed debt, the fund may include more such assets than other similar obligations, Mr. Pridgen said.

Fitch IBCA gave the fund's $390 million senior secured credit agreement an A rating, while the fund's $60 million subordinated notes were rated triple-B. Equity capital of $150 million will be contributed to the fund. About $70 million of that amount will come from CFSC.

"They've been doing distressed debt for a dozen years, and they have a great reputation," said Michael P. McAdams, managing director and chief investment officer of ING Capital Advisors Inc.

"Part of that reputation comes from the fact that they can move so quietly in a totally nonbank world," he said, adding that "they can accomplish things others might not be able to."

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