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EUR CDS Flow - F S Funding falls on IPO proposals
Informa Global Markets - Bondwatch Morning Insight (Europe) (June 15, 2007)

The CDS market opened stronger on Monday buoyed by the solid overnight performance of US equities. The single name market was relatively unchanged as investors looked ahead to the US data, which in the end had little impact, traders said.

Single names in the Crossover sector moved tighter reversing some of the widening seen on Wednesday, but there was little news to drive specific spreads. Traders said that the two stand out moves in the sector were F S Funding and SAS. 5Y CDS on F/S Funding, the vehicle used to acquire ISS, was 30bp tighter at 270/280 after the private equity buyers of ISS said that they were considering an IPO of the company. Sources said that the proceeds of an IPO could be used to pay down debt.

The 5Y CDS on ISS Global fell 15bp to 140/150. 5Y CDS on SAS continued to tighten, falling 10bp to 135/145 following the 20bp move tighter on Wednesday after SAS said it would spin-off non-core businesses and would not increase capex for three years. Sources said that trade was seen down at all time tights of 140. On Thursday the airline said that it was in discussions regarding the future of its BMI stake with German counterpart Lufthansa, meanwhile Spanish travel company Marsans said that it planned to make an offer for SAS" Spanair unit "as quickly as possible".

Earlier SAS had said that it would be happy to sell the unit to Marsans, but was open to alternative offers. 5Y CDS on Fiat was 1bp tighter at 49/51 after it led the way in European car sales in May with a 5.7% rise to 118,950 units, the European Automobile Manufacturers Association announced.

Elsewhere UK travel company First Choice Holidays, which is planning to merge with the tourism unit of TUI, announced that its H1 operating loss before interest and tax improved by 1% Y/Y to GBP 66.5mln. 5Y CDS on TU was 10bp tighter at 220/230. There was little movement in other sectors, but still a handful of rumours to keep traders interested.

In the Financial sector 5Y CDS on BBVA remained flat at 8/9 (senior) 13/15 (sub) despite the bank"s share price rising as much as 4.23% above Wednesday"s close amid rumours that Mexican billionaire Carlos Slim could buy a large stake in the bank. The talk follows a note from an investment bank that identified BBVA as a candidate for a break-up takeover bid.

In the primary market Ericsson said that it had mandated Citi, Goldman Sachs and JP Morgan as joint bookrunners for a benchmark EUR 10-year fixed rate issue and a EUR 7-year FRN tranche. 5Y CDS on Ericsson was 1bp tighter at 19/21. Elsewhere 5Y CDS on Lafarge was 1bp tighter at 23/26 after its planned EUR 500mln 10-year issue priced at at mid-swaps +53bp.



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