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CDS Flow Summary - Tribune sale impasse knocks CDS tighter
Informa Global Markets - CDS Morning Insight (US) (January 17, 2007)

The first few trading sessions of the new year would not be replete without leveraged buyout firms directing the whims of default swap flow. The same goes for when those leveraged buyout plans stall. Media concern Tribune had its head more than once on the chopping block, but talks of few, if any, bidders for the firm removed it from the guillotine-- at least temporarily. A CNBC report cited the possibility that Tribune may not have any suitors line up for the company as a whole. Still a spinoff of the Los Angeles unit could still be on the table.

Analysts have also cited its low stock price as a hindrance to such a deal. TRB shares today fell to USD30.51, its lowest since the summer. But its low stock price is not new to those considering bids for the firm as the USD45 a share that is talked in the market is considered too high. Default in Tribune tightened more than 15% today with trade left at 140/144 from a mid of 169 on Friday. During the session, default in Tribune dealt as tight as 137.

Other leveraged buyout candidate Black & Decker widened further to 67/71 from 64/69. Black & Decker has long struggled with its sales efforts, which bumped it to the top of LBO lists in the first place. The firm also has a long history of using up its free cash flow with share repurchases.

Homebuilders, another LBO targeted sector, managed to take further write-downs in stride. The poor housing market took its toll on Centex and KB Home today, as both said quarterly earnings were off by USD800mln. But the dire demand for housing could have hit the firms in a worse manner. Default subsequently tightened in most names in the sector by a basis point, with the high yielding names easing three basis points. Centex eased to 44/47 from 45/48, while Pulte tightened to 45/48 from 46/49. Lennar was at 54/57 from 53/58, while KB Home tightened to 168/172 from 171/174.

Some restructuring news for the auto sector hit that group in a positive light as well. Default in Ford Motor Co eased to 493/498 from 505/510, while Ford Motor Credit tightened to 264/269 from 272/277. Default in General Motors eased to 359/364 from 365/370. Financial arm GMAC tightened to 101/104 from 105/108. Other movers included paper firm Kimberly Clark which saw its CDS at 26/35 from 25/28 as it outsources IT and possibly cuts jobs.

Kathleen Fitzpatrick Hoffelder



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