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EUR CDS Flow - EMI the big mover as CDS levels hold firm
Informa Global Markets - Bondwatch Morning Insight (Europe) (December 15, 2006)

CDS levels were broadly unchanged on Thursday with most of the iTraxx indices reported to have moved marginally tighter.

There were a handful of announcements that kept traders interested with marked activity in the Crossover sector. 5Y CDS on EMI moved 26bp tighter to 148/158 after it ceased talks with a potential bidder, which was widely believed to be Permira. EMI said the talks were abandoned on grounds that they undervalued the company. Protection on ProSiebenSat, meanwhile, was 17bp wider as 5Y CDS reached 185/210 following media reports that said a consortium comprising KKR and Permira had won the bid for the 50.5% controlling stake being sold by the Haim Saban-led group of owners. Contacts report little to no trade on the broadcaster as the market awaits to see the details of the deal and how much debt will be used. Contacts suggest that the new owners will set their sights on the market leader RTL, which is a subsidiary of Bertelsmann on which 5Y CDS remained unchanged at 30/33. Elsewhere Moody"s revised its outlook on chemical firm Ineos to negative stating that this reflected the slower-than-expected deleveraging of the group in 2006. Traders reported that 5Y CDS on Ineos moved 10bp wider to around 360/370, with the INEGRP 7.875 16 issue seen 0.5bp wider after widening out 1bp earlier on in the day. Late on Thursday the cost of protection on Dutch retailer Ahold surged 22bp wider to 95/100 after rumours circulated that it was the subject of interest from private equity group KKR.

In the Consumer sector Tobacco names traded on Thursday amid more takeover speculation. 5Y CDS on Gallaher was 2bp tighter at 16/20 with trades reported at 19 and 17 after a report in the Wall Street Journal earlier in the day that said the company was close to a takeover pact with Japan Tobacco. Later Gallaher issued a statement saying that it was in discussions with a third party about a 1,140p all cash offer. The company said that there is no certainty that an offer will be made. Elsewhere 5Y CDS on Altadis was unchanged at 27/29 with trade seen at 28 and Imperial Tobacco was unchanged at 32/35 with trade at 27. In Retail names 5Y CDS on both Nestle and Novartis was unmoved at 3/6 after the sale of drugmaker Novartis' medical nutrition unit to Nestle for USD 2.5bln. Note S&P released a statement leaving the ratings on Nestle unchanged.

In the Industrial sector market sources commented that 5Y CDS on UK business services firm Rentokil moved around 10bp wider D/D to 32/37, with trade seen at 35, on rumours of a possible private-equity takeover bid. Note that Rentokil"s share price was also up around 1% from Wednesday"s close



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