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CDS Flow Summary - Home Depot CDS active on earnings carnage
Informa Global Markets - CDS Morning Insight (US) (February 21, 2007)

Home improvement retailer Home Depot still has some fix-it problems of its own after reporting a 28% profit drop for Q4. Once again hurt by housing, Home Depot's same-store sales fell. It had a 4% gain in overall sales.

But a large part of that drop was due to the payout for former head Robert Nardelli, which was to be expected. He will receive roughly USD210mln as a severance package. After Nardelli's six years at the helm of Home Depot, the retailer said net income at the retailer fell to USD925mln, or 46 cents a share, versus USD1.29bln or 60 cents a share. But more worrisome to credit investors still is the firm's renewed commitment to shareholders and doing anything to fix its share price. The selling of Home Depot's Supply unit is still questioned, however. Home Depot reacted accordingly and widened from 15/19 Friday to 16/20. It dealt at 18 basis points. Seven-year CDS traded at 26 with markets left at 26/27, while 10-year CDS dealt at 42.

A collection of other retailers and grocers traded actively today, particularly as oil sold off more than 2% with US crude left at USD58.07. The grocery sector often deals on the back of more funds available to consumers. Kroger traded at 38, on par with Friday's 37/39 market. Albertson's tightened to 94 from 96. Retailer Federated traded at 47, which is in from 47/49. Jones Apparel was at 76/81 from 71/77. JC Penney traded at 41 and 40 in default from 39/42.

More tightening occurred on the back of chicken and beef firm Tyson. Its default was active today, with levels easing to 71/75 from 84/90. Dealers saw considerable interest in the food firm today. The tightening comes despite a federal district judge in Kansas agreeing with workers they should be paid for the time spent putting on protective gear. After its spinoff from Altria, Kraft had nothing but high hopes for itself. Kraft is also in favor of upping its shareholder value in the short term. It will buyback up to USD5bln of shares. It also plans on having more debt. Default in Kraft was left at 16/21 from 16/18.

In other movers, Bombardier Inc dove inward to a mid of 144 from 158. In TMT, Alltel eased to 77 from 84 after the firm was reviewing its strategic options. Avis Budget tightened back this session after recent widening and then tightening following its guarantee. CDS eased to 160 from 166. Eastman Kodak tightened back to 163 from 168.

Kathleen Fitzpatrick Hoffelder



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