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EUR CDS Flow - Takeover talk continues in Consumer sector
Informa Global Markets - Bondwatch Morning Insight (Europe) (March 16, 2007)

Thursday saw the Consumer sector yet again dominate the movers in single name CDS. The iTraxx Crossover indices moved tighter reflecting gains seen in US and European equities, compared to Wednesday"s fall.

The Tobacco names all moved wider after Altadis confirmed that it had received an offer from Britain"s Imperial Tobacco at EUR 45 per share, which valued the company at EUR 11.5bln. 5Y CDS on Altadis initially moved 8bp wider in the morning after rumours abounded suggesting that Altadis was set to sell a 60% stake in Logista, and shares in both entities were suspended from trading. 5Y CDS on Altadis then widened further to 42/44 (+15bp D/D) after the confirmation of the Imperial Tobacco approach whilst 5Y CDS on Imperial Tobacco moved 8bp wider to 38/42. Speculation on consolidation in the tobacco sector has been circulating all including a report in El Confidencial on Wednesday that said British American Tobacco had hired Spanish law firm Uria & Menendex to study a possible EUR 11.7bln bid for Altadis. 5Y CDS on BAT moved 4bp wider to 26/29. 5Y CDS on Cadbury Schweppes tightened 6bp to 43/48 after the company confirmed that it was planning to split into two businesses, one focusing on chocolate and confectionery and the other on soft drinks. It was also reported that Cadbury may receive a GBP 6.5bln offer for its drinks arm from private equity firms Lion Capital and Blackstone. Contacts note that the tightening seen may be down to LBO risk decreasing as the separation goes through.

Amongst the Retailers 5Y CDS on J Sainsbury moved 15bp D/D wider to 115/125, with trade seen at 115 and 120, as rumours swept the market that a bid would be made at the GBP 6 per share level. Media speculation has previously centered on a bid for the group at the GBP 5.5 per share level but a consortium of possible buyers CVC, KKR and Blackstone, have denied this. Both Wm.Morrison and Casino released results which contacts report as pleasing. 5Y CDS on Morrison tightened 5bp to 54/59 after it posted FY operating profit of GBP 423.2mln, compared with GBP 111.5mln in 2005 before the Safeway integration. Chairman Ken Morrison also said that he was not aware of any private equity approaches for the company. 5Y CDS on Casino also tightened moving 2bp to 58/61 and shares climbed as much as 8.85% on Wednesday"s close after it posted FY EBITDA of EUR 1.56bln alongside operating profit of EUR 1.043bln, which rose 7.9% Y/Y, and net income of EUR 600mln, which was higher than expectations.

In the Financial sector 5Y CDS was seen moving around 1-2bp wider again with protection on BCP senior 3bp wider at 10/12 and sub 4bp wider at 14/18 moving the most.



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