EUR CDS Flow - Veolia widens on acquisition comments
Informa Global Markets - Bondwatch Morning Insight (Europe) (March 9, 2007)
Traders report another quiet day on Thursday as CDS levels continued to strengthen amidst an expected ECB rate rise to 3.75% and the BoE keeping rates at 5.25%.
In the single name universe the main move of note came from French utility Veolia in the Energy sector, which moved 2bp wider to 24/26, with trade seen at 25, 26 and 24. Contacts note that the comments it was interested in a bid for compatriot Suez and could justify about EUR 6-7bln for acquisitions reminded the market that Veolia is willing to spend large amounts if needed. Veolia also announced that FY net profit rose 21.9% Y/Y to EUR 758.7mln below expectations. 5Y CDS on Suez was unchanged at 13/15 as it also released FY figures which showed EBITDA above expectations at EUR 7.1bln. Elsewhere EDP said it was planning to invest EUR 2.5bln through 2016 increasing its hydropower capacity by as much as 58%. 5Y CDS was unchanged at 11/14.
In the Consumer sector earnings releases caused specific names to move. 5Y CDS on French drinks maker Pernod-Ricard moved 2bp wider to 49.5/52.5 after it released H1 profit figures that were below analysts" expectations. Pernod added that it would consider bidding for the Absolut vodka brand and that it is in negotiations to buy Stolichnaya vodka from Russia"s SPI group. Shares in Pernod fell as much as 4.17% from Wednesday"s close. Elsewhere 5Y CDS on French retailer Carrefour tightened 2bp to 22/25, wiping out Wednesday"s 1bp widening when Colony Capital and Groupe Arnault said that they had taken a 9.8% holding in the retailer.
Carrefour today reported that FY ACDA increased 5.7% to EUR 4.845bln alongside a 3.3% rise in net income from recurring operations to EUR 1.857bln. Also releasing results today was compatriot PPR which reported that FY recurring operating income increased 19.9% Y/Y to EUR 1.275bln driven by strong growth in the Luxury Goods division. 5Y CDS was unchanged at 41/44. Elsewhere 5Y CDS on UK based sugar producer Tate & Lyle was flat at 37/40 as its share price gained 2.7% on Wednesday"s close on the back of rumours that it has been approached with a takeover bid from private equity.