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CDS Report - Barclays and Experian move on trading updates
Informa Global Markets - Bondwatch Morning Insight (Europe) (November 16, 2007)

The CDS market was wider on Thursday after a brief rally the day before. News of lower than expected write-downs at Barclays was not enough to halt the weakness and there was still rumours and fears of bigger write-downs to come for European banks. As credit spreads opened a touch wider following a sharp sell-off in US equities late on Wednesday, UK bank Barclays eased investors' fears with a surprise 10-month trading update. Senior 5Y CDS on Barclays moved 11bp tighter at 54/59 with sub 6bp tighter at 75/80 after it said that net income and pre-tax profit for the 10 months to 31-Oct were ahead of the record prior year period. Barclays added that it was booking credit, mortgage and leveraged finance related charges and write-downs of GBP 500mln net of hedging in Q3 and an additional GBP 800mln net charges and write downs in October.

Elsewhere in the sector senior 5Y CDS on Credit Agricole was flat at 44/49 after it reported a 17% Y/Y fall in Q3 net profit. During the quarter, the bank's Calyon unit suffered EUR 230mln of losses from unauthorised trading in New York. UBS was compelled to come out and defend itself against rumours of additional write-downs to the tune of USD 8bln and that it was not holding back any further write-downs for quarters beyond Q4. UBS said that it does not expect write-downs to exceed the figures implied by its outlook. Senior 5Y CDS on UBS was 1bp tighter at 55/60, with sub at 77/82 (flat D/D).

There was some interest in the Consumer names with results from Experian and more bid activity for Scottish & Newcastle. 5Y CDS on Experian was 6bp wider at 50/52, with trade at 51, and its shares had fallen as much as 19% on Wednesday's close following the company's H1 results. Shares dropped to an all time low after Experian said that it expected a further slow down in revenue growth in H2. The company said that Q2 sales had declined because of the effects of the sub-prime mortgage crisis on the US. Elsewhere Carlsberg and Heineken increased their offer for Scottish & Newcastle to GBP 7.50 per share in cash valuing the company at GBP 7.3bln. 5Y CDS on Carlsberg was 3bp wider at 63/70, whilst Heineken was flat at 43/50. Scottish & Newcastle later reject the increased offer. 5Y CDS on Scottish & Newcastle was flat at 49/56. Spreads were wider in the TMT sector; this was led by BT, which was 6bp wider at 53.5/56.5, after it was reported to be planning a EUR 1bln new 5Y bond issue, which could yield 90bp above mid-swaps.

Elsewhere Vivendi said late on Wednesday that Q3 EBITDA increased 2.7% Y/Y, slightly above analyst estimates. Its 5Y CDS was 4bp wider at 49/53. Reed Elsevier said that it was on track to deliver its goal of a minimum 10% growth in adjusted EPS at constant currencies in 2007, but its 5Y CDS was still 3bp wider at 36.5/39.5. CS



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