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EUR CDS Flow - Rhodia and Fiat tighter as Cablecom settles
Informa Global Markets - Bondwatch Morning Insight (Europe) (October 27, 2006)

The CDS market had a positive undertone on Thursday following confirmation of expectations late on Wednesday for an unchanged US rate of 5.25%. Contacts commented that although the decision was not a surprise, markets still took a more positive outlook on the decision. The Crossover sector led most of the shift tighter with 5Y CDS on cable-TV operator Cablecom much calmer at 395/415 (+5bp D/D) as the market waited for the EUR 300mln 10Y issue (which priced at 412bp above govvies with a coupon of 8%). Note that US hedge fund Blue Mountain Capital said that Cablecom should change the terms of the planned bond given the reaction in the CDS universe. French chemicals company Rhodia moved 15bp firmer D/D to 160/170 with trade seen at 165 after the company said it is on track to meet 2006 earnings targets and that Q3 was a 'good' quarter. Note that Rhodia announced late on Wednesday that it had agreed to sell its silicone unit for EUR 400mln to China National Blue Star Corp. Italian carmaker Fiat also edged tighter to the tune of 10bp to 115/125 after it announced Q3 net income of EUR 200mln, which was ahead of expectations. Computer-services firm Cap Gemini was also active, though its 5Y contract is very illiquid. Trade was seen at 78 with spreads quoted at 78/83 (-1.5bp D/D). Following the story with Air Liquide on Wednesday, it was the turn of German steelmaker ThyssenKrupp to be subject to takeover talk. The difference in ThyssenKrupp's case however is that a trade buyer is rumoured to be interested - namely US company Nucor Corp - as opposed to an LBO style approach. As such 5Y CDS was seen at 45/48 towards the close (-2bp D/D). The TMT sector also experienced active trading. 5Y CDS in Telecom Italia traded at 62 (though spreads flat D/D at 63/65) following a report in Il Sole/24 that it is not planning to sell its domestic wireless unit. Elsewhere in the sector France Telecom reported a 3.5% Y/Y rise in Q3 EBITDA to EUR 4.884bln, slightly ahead of expectations. 5Y CDS traded at 34, although spreads were also unmoved at 33/36.



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