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CDS Flow Summary: Boston Scientific still in fight mode
Informa Global Markets - CDS Morning Insight (US) (September 27, 2006)

Who would have predicted that the fight for stent maker Guidant would still be going on today. While Boston Scientific won the hand of Guidant free and clear in January of this year, the battle was long and hard. Though Boston Scientific is calling competitor Johnson & Johnson's lawsuit 'meritless,' it has contributed to a negative shadow over the firm. J&J blames both Boston Scientific and Abbott Labs with causing Guidant to breach its merger agreement. But Boston Scientific has more troubles with S&P, however. With the purchase of Guidant, Boston Scientific originally had about USD9bln in debt. S&P said today that even though it will incur about USD1bln less in incremental debt to finance the purchase of Guidant, its key markets of cardiac rhythm and stents are surprisingly weak. Thus, it lowered its outlook on the firm to negative from stable. Default widened to 63/66 from 55/65.

With more fallout over its own legal battles, Altria CDS extended to 37/41 from 36/40, while subsidiary Kraft pushed out to 19/26 from 19/23. The inclusion of the 'light cigarette cases' against Altria classified as class action status contributed to more widening in default. The delay in the spin-off plans for majority owned Kraft has aided its default to widen.

With talks progressing forward for auto giant General Motors in having a linkage with Nissan and Renault, its default performed better today. Markets were left at 545/555 from 555/565. GMAC was relatively stable at 190/195. Default in Ford Motor Co eased to 660/675 from 670/680, while Ford Motor Credit tightened to 365/370 from 377/383. Parts makers also performed better with the exception of troubled Visteon, now bid at 475, out from 465 Monday. Other movers in the sector today were Lear, which eased to 550/580 from 570/605. Similarly, the recent spread extension in Cooper Tire & Rubber tightened to 455/465 from 470/480.

Other active names today included Boeing Capital at 10/14 and Boeing Corp at 11/15 from 12/15. Lockheed Martin was at 14/20 from 18/22. Bombardier Inc eased to 270/280 from 280/290. The firm received a reprieve from Delta Air Lines, which has yet to decide whether it will retain or terminate its lease to operate 108 regional jets made by Bombardier. GE Capital Corp firmed to 12.5/13.5 from 12/13. In other moves, advertising group Interpubic Group eased to 305/315 from 330/340.

Kathleen Fitzpatrick Hoffelder



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