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CDS Flow Summary - Gap, Alltel, Goodyear shake up CDS session
Informa Global Markets - CDS Morning Insight (US) (January 10, 2007)

Whether it is actually exploring strategic alternatives, simply rumored to be on the chopping block, or confirming details of previous restructuring, Gap, Alltel and Goodyear Tire were the main jumpers in default today. Trading was active in troubled retailer Gap Inc as credit investors digested news that it hired Goldman as an advisor. The debate over whether Gap would indeed be sold or some of its divisions, such as Old Navy, could be spun off. Credit Suisse analysts maintained in a research note that the probability of an LBO of Gap is only at 35% due to the uncertainty of the firm's turnaround and lack of strong management. Its real estate holdings, or the lack of them, is also another non-attractive point in selling the retailer. Default gyrated today with dealing seen at 145, out to 160 and back to trade at 150. This is out from 132/136. 10yr Gap dealt actively at 253 and 250.

Wireless network operator Alltel gapped out in default due to its own rumors that it could be up for sale. Alltel had been rumored back in December that private equity bidders were interested in the firm. Its low debt of USD3bln and market capitalization of USD21.7bln is what is keeping it on LBO target lists. Default widened to 115/120 from 97/102.

Tire maker Goodyear Tire firmed up details of its buyout/restructuring plans, which assisted in tightening its default. Goodyear said it has about 1,100 job cuts on the table. It will also save USD610mln through 2009. Goodyear CDS eased to 205 from 230.

In retail, RadioShack also traded today at 180/190, where it finished out yesterday. The firm had a positive forecast for the fourth quarter, though same-store sales are still a concern. But diverse retailer Limited Brands had a bit more play today. Its default widened on dealing seen at 65, which is out from 52/57. Seven-year Limited Brands CDS also traded at 95. Similarly, Federated had long-end CDS trade with 10y CDS going through at 115.

More job cuts were not particularly favorable to the default of telecom Sprint Nextel as it assisted in getting the firm put on Watch by S&P. It suffered 300,000 subscriber losses. Its default widened to 64/68 from 58. In other moves, Toys R Us tightened to 455/460, in from 475/480. Royal Caribbean eased to 95/100 from 100/105.

Kathleen Fitzpatrick Hoffelder

 

 

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