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CDS Flow Summary - FMCO finally puts its plan into effect
Informa Global Markets - CDS Morning Insight (US) (October 11, 2006)

Ford Motor Co on Tuesday announced that it will begin offering its previously disclosed buyout or early retirement packages to all 75,000 of its U.S. hourly employees starting next week. Employees represented by the United Auto Workers will have from next Monday until Nov. 27 to either choose one of eight buyout programs or stay on with the financially challenged automaker. The programs, announced last month, include lump-sum payments of up to USD140,000 and tuition reimbursement in addition to more traditional early retirement packages. Ford has said it intends to cut about 30,000 hourly jobs and 14,000 salaried jobs by the end of 2008. The cuts would reduce Ford's total North American work force by 29%. 5yr USD CDS in FMCO could be seen edging inward to a closing market of 640/650, while default in FMCC tightened -12.5 bps to a closing market of 355/360 on Wednesday.

General Motors Corp investor TCW Group Inc (with 7.85mln shares), said it backs Chief Executive officer Rick Wagoner's plan to revive profit. Wagoner plans on shutting plants, cutting jobs and introducing new models in a bid to recover from USD10.6bln in losses last year. 5yr USD CDS in GMCO pulled in -20 bps from Friday's closing mid of 545 to Tuesday's close of 525. Meanwhile 5yr default in GMAC tightened slightly to 163/168 (D/D -4.5 bps).

Elsewhere after pulling out of the Singapore casino bid Harrah's Entertainment Inc saw two of its shareholders sue the company, its board and its proposed buyers, alleging that a USD15.1bln takeover offer is an apparent camouflaged management buyout. The proposed class-action lawsuit filed in Delaware Chancery Court says the offer was timed to take advantage of a recent slump in the share price of Harrah's. The suit seeks to stop the proposed buyout and conduct "a fair process" for selling shares of Harrah's, the world's largest casino operator. 5yr USD CDS in the company moved slightly with the news, as it widened out to a closing market of 250/260, which is out from Friday's close of 246/256.

In the industrial sector Alcoa saw its Q3 profit nearly double to USD537mln, while revenue surged 19% to USD7.63bln 5yr USD CDS in the company finished with a market of 17/23 on Tuesday. In the grocer sector Albertsons Inc pulled in -11 bps to a closing market of 168/180. Default in Federated firmed to 65/75, which is out from Friday's close of 64/68.

Andre Hinckson



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