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CDS Report - Vivendi tightens after Neuf Cegetel offer
Informa Global Markets - Bondwatch Morning Insight (Europe) (December 21, 2007)

As expected it was another quiet day in the CDS markets on Thursday though there were a handful of specific moves to keep things interesting.

There was some big news in the TMT sector on Tuesday as the UK competition commission published its findings on BSkyB's purchase of a 17.9% stake in ITV and there was confirmation that SFR was bidding for the remaining shares of Neuf Cegetel. 5Y CDS on ITV widened 5bp to 107/112 following the Competition Commission's recommendation that BSkyB cut its stake in ITV to below 7.5%. 5Y CDS on BSkyB was flat at 57/60. Traders said that this recommendation was expected and there had been no trade on ITV or BSkyB. 5Y CDS on Vivendi tightened 3bp to 61/65 following the announcement that its SFR unit had agreed to acquire Louis Dreyfus' 29.5% stake in Neuf Cegetel for EUR 2.12bln and would offer EUR 36.5 a share for the remainder. Vivendi said that SFR would finance the transaction through debt, with Vivendi granting a loan. To repay this loan SFR agreed to considerably reduce dividend payments it would receive in the next three financial years. Later S&P placed its ratings on Vivendi on CreditWatch negative, but said that any downgrade would most probably be limited to one notch, though an affirmation of the BBB rating was most likely due to the positive impact of an equity issue on Vivendi's debt measures and financial policy. SFR is also 44% owned by Vodafone and its 5Y CDS was 3bp wider at 54/57. Elsewhere, 5Y CDS on Bertelsmann was unchanged at 49/53 after it said that it did not plan to sell its 74.9% majority stake in Gruner + Jahr, following reports that it had asked banks to evaluate the unit.

It was also reported that Bertelsmann was interested in buying News Corp's publishing unit HarperCollins for around USD 1bln. Other movers included 5Y CDS on BAA in the Industrial sector, which was 10bp tighter at 200/210. Traders said that there was no specific news behind the move, but that its bonds had performed better. Elsewhere in the sector 5Y CDS on Atlantia was flat at 41/45 after the Italian infrastructure minister said that the company could raise tariffs by 3.61% in 2008.

Traders said that 5Y CDS on Air France had not traded and was 3bp wider at 84/97 following reports that the Italian government favoured Air France-KLM's proposal for Alitalia over that of domestic airline Air One. Elsewhere in the Consumer sector Accor said that it had sold 57 hotels in France and 10 in Switzerland for EUR 518mln, which would reduce its adjusted net debt by approx EUR 350mln. 5Y CDS on Accor was 2bp tighter at 44/47. CS



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