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EUR CDS Flow - Attention turns to Hammerson after KKR talk
Informa Global Markets - Bondwatch Morning Insight (Europe) (May 11, 2007)

Thursday was a quiet day in the single name CDS market. There were a handful of movers, the largest of which came from Hammerson.

The M&A spotlight shone firmly on the UK property company taking the attention away from Hanson and Heidelberg in the Industrial sector. 5Y CDS on Hammerson initially moved as much as 15bp wider after a report said that private equity firm KKR was looking at a takeover of the company. The report valued Hammerson at around GBP 4.6bln and said that US counterpart Vornado Realty trust had been sounding out private equity partners over a possible move on a British property target. Shares in Hammerson were up as much as 12.5% on Wednesday's close and 5Y CDS ended at 42/47 (+9bp D/D). Late in the day 5Y CDS on Clariant jumped 9bp wider to 54/57 following an 8.7% rise in its share price based on takeover speculation. It was rumoured that a private equity firm may be interested, whilst Lanxess were also rumoured to be interested. 5Y CDS on Lanxess was unchanged at 68/69. Elsewhere in the sector EADS released Q1 results which showed a small operating profit as results were hit by a EUR 688mln charge for Airbus" Power8 cost cutting program. 5Y CDS was unchanged at 16/19, despite warnings that 2007 would be a tough year for EADS.

The TMT sector was flat with only Deutsche Telekom providing any news of note. The German company reported that Q1 EBITDA fell 7.1% Y/Y to EUR 4.543bln and then later in the day the Ver.di union announced that Deutsche Telekom workers would begin a strike on Friday in protest over plans to move 50,000 employees to lower paid jobs. 5Y CDS was unaffected remaining at 24/27. Sources note the Consumer sector was subdued with the only move in CDS coming from Carrefour, which was 1bp wider at 25/28. This small move followed market rumours about an LBO causing shares in Carrefour to climb 2.5% on Wednesday's close. Contacts said that the move in CDS was limited as the market did not give much credence to the LBO talk. Elsewhere Altadis posted a 6.8% Y/Y rise in Q1 EBITDA, which was ahead of expectation but 5Y CDS was flat at 91/94.

In the Auto sector traders said that 5Y CDS on DaimlerChrysler was volatile on the back of speculation surrounding the future of its Chrysler unit. 5Y CDS moved tighter overnight to open around 29/30 after late on Wednesday Magna International said that it was still interested in buying the Chrysler unit and would not need to go into debt to do this. On Thursday Magna said that Russian Machines had purchased a USD 1.54bln stake in Magna and that it was "unclear" what role Russian Machines would have in relation to the Chrysler bid. Magna did say however that Russian Machines would have a "heavy involvement" if its bid succeeded. 5Y CDS on DCX was 1.5bp tighter D/D at 31/32, but 2bp wider intra day.

In the Crossover sector 5Y CDS on International Power moved 5bp tighter to 155/175 following the release if its Q1 earnings which showed that Q1 profit from operations rose 5% Y/Y to GBP 228mln. Elsewhere, 5Y CDS on Ahold edged 1bp tighter to 54/56 after Moody's late on Wednesday placed the company's ratings on review for upgrade to investment grade status



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