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EUR CDS Flow - IPO talk moves Degussa & Akzo Nobel tighter
Informa Global Markets - Bondwatch Morning Insight (Europe) (January 26, 2007)

Traders reported a subdued day in single name CDS on Thursday with levels broadly unchanged. The iTraxx Crossover index traded firmer showing no signs of stopping its tightening trend.

A flurry of news and announcements on Thursday morning was seen in the Industrial sector. It was again LBO talk that produced the first main move of the day as 5Y CDS on Swiss chemical concern Clariant moved 3bp wider to 49/53 following a report in "Cash" that the company may be a takeover target for private-equity. Note that Ciba was also cited as a potential candidate. 5Y CDS on Ciba was 2bp tighter at 42/45. IPO talk pushed 5Y CDS on Akzo Nobel 2bp tighter to 26/29 after the company confirmed that it was pressing ahead with its plan to float 20-30% of its Organon unit on the stock exchange, easing concerns of private equity involvement. Akzo"s shares fell 1.90% in early trade but regained some of their losses later in the day. Shares in AirLiquide also dropped, losing as much as 3.62% on Wednesday"s close, after it announced Q4 sales of EUR 2.8mln, up 4.4% Y/Y on a comparable basis but down 0.9% overall and missing expectations. 5Y CDS on Air Liquide was unchanged at 20/23. Also releasing results was Siemens, which announced a fall in Q1 net profit of 16% Y/Y to EUR 788mln while after tax profit increased 17% to EUR 714mln. Siemens also said that it had agreed to buy the industrial design software concern UGS for USD 3.5bln and that it would float its VDO unit on the stock market. 5Y CDS on Siemens was unchanged at 13/16 but the shares reacted favourably increasing as much as 7.0% on Wednesday"s close. Elsewhere in the sector trade was seen in 5Y CDS on ICI at 33 in a market of 33/36 (- D/D) and on Stora Enso at 39 in a market of 40/43 (-).

In the Crossover sector contacts reported 5Y CDS on Degussa moving 10bp tighter to 94/97 after a report in the Rheinische Post said that the German government is nearing an agreement on coal subsidies that would allow Degussa"s parent company RAG to go public this year.

In the Auto sector Valeo moved 2bp tighter to 78/81 with trade at 78, in line with similar names, after Guy Wyser-Pratte a US investor announced he had bought a 2.4% stake in the French auto parts maker worth approx EUR 66mln. Wyser-Pratte said that his aim was to get Valeo to focus on restructuring and pruning its operations, adding that a proposed purchase of US counterpart Visteon would be a "mistake" and that he was not happy with the Ford plant purchase. Wyser-Pratte and his partners said that they want to bring an "immediate" halt to any further acquisitions. Trade was also seen on Daimler Chrysler at 50 in a market of 50/52 (-1).



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