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EUR CDS Flow - EUR CDS Flow - KPN widens as LBO rumours resurface
Informa Global Markets - Bondwatch Morning Insight (Europe) (January 5, 2007)

Thursday was a busier day for traders as CDS single names moved generally a touch wider, following the retreat in European equities after their strong start in 2007. Contacts report that investors were covering their long risk positions.

In the TMT sector 5Y CDS on Dutch telecoms firm KPN continued on the widening course it started before Christmas moving 4bp to 63/67 with trade at 60.5, as contacts report LBO talk reappearing in two investment banks" research documents. Also in the sector trade was seen on UK mobile operator Vodafone at 25.5, in a market of 24/27. Note it was reported on Thursday that two more companies, Verizon Wireless and the Hinduja business group, had joined the race for Hutchinson Essar. Elsewhere 5Y CDS on Telefonica was at 34/37 (-) with trade at 36, TeliaSonera was at 46/51 (-) with trade at 51, and Hellenic Telecom was at 41/43 (-) with trade at 41.

In the Consumer sector it was the turn of UK based Kingfisher to steal the spotlight from PPR as 5Y CDS on the UK firm moved 1bp wider to 48/51 with trade seen at 51, after rumours circulated that the company could possibly be a target for US counterpart Home Depot. These rumours surfaced after the departure of Home Depot"s CEO Robert Nardelli on Wednesday. Contacts report that the takeover is a possibility but are waiting to see if the companies announce anything themselves. Trade was also seen in GUS at 45, in a market of 43/45 and Dixons at 41, in a market of 38/41. 5Y CDS on PPR was unchanged at 52/55 after the French stock market regulator told PPR that it has until next Tuesday to state that it has no plans to bid for Suez, then the AMF will meet with the parties involved to fix a date at which PPR needs to register a planned public offer.

In the Energy sector 5Y CDS on Suez did move continuing its push wider by 6bp to 25/27. During the day the largest shareholder in French utility Suez Albert Frere said that he backs the merger between GdF and Suez. However, French weekly Marrianne said in a report released ahead of its publication on Saturday that Frere and LVMH chairman Bernard Arnault are planning their own bid for Suez. The plan involves the break up of the company. 5Y CDS on GdF was unmoved at 12/15. Elsewhere trade was seen on Iberdrola at 22, in a market of 21/24.



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