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CDS Flow Summary - EOP battle heats up; Radian CDS swoons
Informa Global Markets - CDS Morning Insight (US) (February 7, 2007)

The tug-of-war battle that is brewing for real estate investment trust Equity Office Properties just turned up another level as Blackstone Group upped its bid for the REIT after Vornado put more spice into its bid.

After standing pat Monday after Vornado's revised bid, Blackstone's more flavorful offer of USD23bln in cash or USD55.50 a share today sent EOP CDS ballooning out to 62/65 from 55/60. The stakes are raised now for Vornado to enter the fray again. But as equity investors in the stock rejoice once again, as its shares again closed higher at USD55.90, credit investors worried. Vornado's deal essentially was a nonbinding letter and included a tender offer for up to 55% of the landlord's shares at USD56 per share in cash. EOP and Blackstone also upped the cost of breaking up their agreement, with Blackstone to receive a USD720mln termination fee from USD500mln.

A merger between a couple of mortgage insurers was announced with much less fanfare and fighting. MGIC plans to buy Radian for USD4.9bln. Both their default swaps tightened but Radian jumped further to 26/29 from 36, while MGIC eased one bp to 26/29. The deal was hailed as a positive play for both names but Moody's put MGIC's ratings on watch negative due to uncertainties over the future structure. Radian could actually face an upgrade by the agency.

New product plans for photographic concern Eastman Kodak saw markets move out of the gate today with CDS left at 170/175 from 156/164. The firm is putting a lot of its eggs into the printer basket with the unveiling of its new printers that use low cost ink cartridges, designed to compete with Hewlett-Packard. The printers will sell exclusively at Best Buy initially. HP stood by its products, however. Kodak is due to meet with investors in New York this week.

For the autos, restructuring news continued to drive trade and default swap moves. Parts maker Lear, which is battling its own takeover finished at 320/330, in a touch from 323/330. Ford Motor Co plans to go back to using its Taurus name for its Five Hundred sedan. It is also holding a news conference from the Chicago Auto Show tomorrow. Default in Ford eased to 447/452 from 450/455, while Ford Motor Credit eased to 227/232 from 230/235. General Motors eased to 327/333 from 330/335. GMAC tightened to 96/99 from 97/100. ResCap also eased on trade to 90/92 from dealing at 95 Monday.

Kathleen Fitzpatrick Hoffelder



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