CDS Insight
Wednesday, 08 November 2006
Tel: +1 (212) 907 5800 www.informagm.com (US Edition – Updated 08:00 EST)
Morning Insight
Today’s Top Stories • • •
Clear Channel eyed by France's JCDecaux Merck discloses new tax woes Cooper Tire turns in a loss for Q3
What’s HOT in Credit? • •
Ratings Movers Valero, Computer Sciences Sara Lee, Kroger, Toll Brothers, Beazer Homes,
US CDS Roundup (Previous Trading Day)
CDS Flow Summary - Sara Lee cooks up better CDS on bread gain
A c t iv e N a m e s - H is t o ric a l S pre a ds
Act ive Names Closing Mid
50
750
45
650
40 550 35 450 30 350 25 250 20 150
Bakery product and cheesecake maker Sara Lee stirred up a notable tightening in default today as market participants gave the firm a pat on the back for successfully selling off its Hanesbrands for a one-time payment of USD2.4bln and successfully adding products in the right places such as in breads and breakfast. Net income rose to USD333mln, or 44 cents a share, from USD67mln, or 9 cents a share. Sales rose 4.7% to USD2.89bln from USD2.76bln. Sara Lee also raised its earnings forecast ending in June to 86 cents to 92 cents a share. Default tightened accordingly on a last bout of trade at 68, which is in from 70/76 Monday. While Sara Lee's transformation continues to be mulled, LBO candidate Avon Products again had default swap trade. Levels went through at 20 today, which is in from 23/28. Recall that the firm blew to 25 from 15 basis points last week on LBO rumors. Food related concerns had noticeable tightening. Cargill traded at 16, which is in from 20/25, while grocer Kroger traded at the tight level of 34, leaving markets at 33/35 from 38/43 and 10y CDS traded at 65 basis points. But while food and cosmetic names traded in a positive light this session, homebuilders were not so lucky. Toll Brothers and competitor Beazer Homes both reported dismal earnings results due to cancellations and a slow down in orders. Toll's sales declined to USD1.81bln from USD2.01bln and more importantly for default, cut its forecast for 2007. Beazer Homes said its fiscal Q4 net income fell more than 40% to USD91.9mln. Default in Toll Brothers was at 81/85, out from 78/82. Similarly, Beazer Homes was at 210/220, from 213/218. Troubled retailer Jones Apparel traded at 68 in default and then 70 basis points, which is out from 64/70 Monday. Gap Inc was fairly steady at 100/110, out from 100/105. Dillard's eased to 150/155 from 160/165. In the medical field, Boston Scientific default traded at 54 today, in from 54/57. St Jude's heart device software won US approval for computers used to control implanted pacemakers. Tenet Healthcare widened to 407/427 from 400/410 yesterday. An earnings restatement, meanwhile, for General Motors managed to send its default inward to 425/430 from 430/440, while GMAC had a last round of trade at 135, leaving it at 133/137 from 133/138. Ford Motor Co eased to 525/530 from 540/550, while Ford Motor Credit eased to 330/335. CDS Indices Summary - Winds of widening blows through 5yr CDS The tightening within the 5yr CDS indices, lead by the series 7 DJ CDX NA XO index which showed plenty activity through the course of last week and through to Monday's close, has since turned around to a wider end of day on Tuesday. Similarly the tightening seen in the 5yr DJ CDX NA IG7 index assisted by constant proportion debt obligations (CPDO's) for the past two weeks succumb to widening on the day as the index finished with a market of 33.25/33.75 (D/D +0.5 bp). Default in the DJ CDX NA HVOL7 index tightened -0.75 bp towards the close on Monday, but got pressured out +0.25 bp on Tuesday to a closing market of 78.75/79.25. Standing firm on Tuesday was default in the 5yr DJ CDX NA XO index which finished with an unchanged market of 148/149.5. Meanwhile fighting back Tuesday's widening trend was 5yr default in the old series 6 DJ CDX NA XO index, which pulled in -2.5 bps on the day, eventually closing at 154/157. In single names default in FMCO tighten -17.5 to a market of 525/530, while FMCC joined with a closing market of 330/335 (D/D -12.5 bps). Default in GMCO completed its trading day by tightening -7.5 bps to a closing mid of 427.5. GMAC stood unchanged with a mid of 135. REUTERS: IGMD Tokyo +81 3 5210 2468 Hong Kong +852 2234 2000 Singapore +65 6226 3068
15
10 10-Oct
50 18-Oct 26-Oct 03-Nov
K r oger Co/ T he - 34bp Gap I nc. - 105bp T enet Heal t hcar e Cor p - 417bp For d M ot or Cor p - 528bp
Sar a Lee Cor p - 67bp Di l l ar d's I nc - 153bp Gener al M ot or s Cor p - 428bp
Source: IGM, Bloomberg
DJ CDX NA Series 7 5yr DJ IG 7 DJ HVOL 7 CDX.NA.HY 7 DJ Crossover 7 DJ HVOL 6 5yr DJ HVOL 4
Bid
Offer
Daily Change
Weekly Change
Monthly Change
33.25 78.75 102.150 148.00 68.00
33.75 79.25 102.152 149.50 69.00
0.50 0.25 0.081 0.00 0.25
0.00 -0.75 0.21 -4.75 -2.50
-5.75 -6.75 1.81 -22.00 -7.25
64.75
67.25
0.25
-2.50
-7.25
Source: IGM, Bloomberg
BLOOMBERG: IGMCDS London +44 20 7017 5400 New York +1 212 907 5800
CDS Insight
(US Edition)
Wednesday, 08 November 2006
Stories of the Day
Aerospace
Plane manufacturer Boeing has won a KRW 1.6trl (USD 1.71bln) contract to supply four 737 early-warning surveillance planes to South Korea, the South Korean defence ministry said on Wednesday. The aircraft are aimed at increasing South Korea’s response to changing strategic dynamics on the Korean Peninsula, the ministry said. 5Y USD CDS (M) Boeing Corp at 7/11; Boeing Capital at 8/10 yesterday. Guangdong Development Bank, reported the China Daily today, citing a government source. The paper also added that in midOctober the Guangdong government had already reported its choice of Citigroup Inc to the China Banking Regulatory Commission. 5Y USD CDS (M) Citigroup senior at 7/8, sub at 10/12 yesterday.
Food & Beverage
Fast food giant McDonald's said its same store sales for the month of October rose 5.5% globally. The US turned in a 5.6% rise, while the Europe sales rose 5.5%. Asia and Pacific Rim areas rose 4.7%. The firm credits its breakfast items and Monopoly game as helping its sales. 5y USD CDS in McDonald's is at 11/15 today.
Autos
Parts maker Cooper Tire & Rubber turned in a Q3 loss per share of 41 cents including items with net income at a loss of USD25mln. This compares with a loss of USD840,000 or one cent a share. This is above expectations for a loss of 17 cents a share. The firm had an income tax expense of USD7mln. Sales were up, however, at 28% to USD716mln. It expects its raw material index to be down 2% in the fourth quarter versus the third quarter. Cooper Tire plans to cut costs and reduce inventory going forward. 5y USD CDS was at a mid of 375 yesterday.
Pharmaceuticals
Drug company Merck has disclosed four separate tax disputes in the US and Canada which have potential liabilities of up to USD 5.58bln, which adds to the company’s litigation pressures, the WSJ reports today. Note that the report comes after an announcement from Merck late yesterday that it filed an additional USD 1.5bln tax liability and said that it may increase to USD 3.8bln. 5Y USD CDS (M) Merck & Co Inc at 6/9 today.
Energy
Electricity producer Dynegy has today reported a Q3 net loss of USD 69mln (including USD 98mln in after-tax charges), which compares to net income of USD 29mln last year. The company also reported an operating loss of USD 18mln (vs. profit of USD 65mln last year) and revenue of USD 581mln, down 24.5%, alongside free cash flow of USD 33mln as at 30-Sep from negative USD 324mln last year. Dynegy said that it sees FY cash flow being positive in a range of USD 5-50mln (from a previously expected range of USD 0-75mln) with a FY net loss of USD 305-325mln from previous guidance of USD 215-260mln. 5Y USD CDS (M) Dynegy Holdings Inc at 215/235 yesterday.
TMT
US media company Clear Channel Communications’ majorityowned Clear Channel Outdoor Holdings unit is being eyed by France’s JCDecaux, the French company said in an interview with the Wall Street Journal published today. Private equity groups are in advanced talks to buy Clear Channel Communications, and so the unit, which has a market value of USD 8.9bln, could be put up for sale in order to pay down debt. 5Y EUR CDS (MM) Clear Channel Communications Inc at 264/268 on 03-Nov.
Financials
Financial services firm Citigroup is likely to beat French banking conglomerate Societe Generale to buy a 19.9% stake in the Real-time news pulses available at www.informagm.com
BLOOMBERG: IGMCDS London +44 20 7017 5400 New York +1 212 907 5800 Tokyo +81 3 5210 2468
REUTERS: IGMD Hong Kong +852 2234 2000 Singapore +65 6226 3068
CDS Insight
(US Edition)
Wednesday, 08 November 2006
Corporate Events Calendar
Date
08-Nov 08-Nov 08-Nov 08-Nov 08-Nov 09-Nov 09-Nov 09-Nov 09-Nov 09-Nov 09-Nov 09-Nov 09-Nov 13-Nov 14-Nov 14-Nov 14-Nov 14-Nov 14-Nov 14-Nov 14-Nov 15-Nov 15-Nov 15-Nov 16-Nov 16-Nov 16-Nov 17-Nov 20-Nov 20-Nov 20-Nov 21-Nov 21-Nov 22-Nov 29-Nov 30-Nov 06-Dec 06-Dec 06-Dec
Event Information Last Updated 13:14 GMT on 08-Nov-06
Avis Budget Group Inc Q3 Earnings Release Cooper Tire & Rubber Q3 Earnings Release Csr Limited H1 Earnings Release Federated Department Stores Q3 Earnings Release Interpublic Group Of Cos Inc Q3 Earnings Release American International Group Q3 Earnings Release Delphi Corp Q3 Earnings Release Gmac Llc Q3 Earnings Release Goodyear Tire & Rubber Co Q3 Earnings Release J.C. Penney Co Inc Q3 Earnings Release Liberty Media Llc-A Q3 Earnings Release The Walt Disney Co. Q4 Earnings Release Txu Corp Q3 Earnings Release Tyson Foods Inc-Cl A Q4 Earnings Release Arvinmeritor Inc Q4 Earnings Release Dr Horton Inc Q4 Earnings Release Home Depot Inc Q3 Earnings Release Oversea-Chinese Banking Corp Q3 Earnings Release Staples Inc Q3 Earnings Release Target Corp Q3 Earnings Release Wal-Mart Stores Inc Q3 Earnings Release Limited Brands Inc Q3 Earnings Release Macquarie Bank Limited H1 Earnings Release Tyco International Ltd Q4 Earnings Release Dell Inc Q3 Earnings Release Gap Inc/The Q3 Earnings Release Hewlett-Packard Co Q4 Earnings Release Malayan Banking Bhd Q1 Earnings Release Lowe's Cos Inc Q3 Earnings Release Medtronic Inc Q2 Earnings Release Nordstrom Inc Q3 Earnings Release Campbell Soup Co Q1 Earnings Release Deere & Co Q4 Earnings Release Hj Heinz Co Q2 Earnings Release Telekom Malaysia Bhd Q3 Earnings Release Bombardier Inc 'B' Q3 Earnings Release AutoZone Inc Q1 Earnings Release Dillards Inc-Cl A Q3 Earnings Release Kroger Co Q3 Earnings Release 93 434 27 8 6 24 8 6 17 14 82 18 100 39 19 17 17 14 17 20 20 21 219 39 150 33 135 367 39 151 10 387 16 41 228 21
5Y CDS Levels Bid Offer
401 18 46 230 26
140 370 44 159 14
97 454 29 12 11 29 11 7 19 16 86 22 110 41 26 19 19 16 29 22 22 27 230 44 155 38
BLOOMBERG: IGMCDS London +44 20 7017 5400 New York +1 212 907 5800 Tokyo +81 3 5210 2468
REUTERS: IGMD Hong Kong +852 2234 2000 Singapore +65 6226 3068
CDS Insight
(US Edition)
Wednesday, 08 November 2006
Ratings Actions
Date
07-Nov-06 07-Nov-06 07-Nov-06 07-Nov-06 07-Nov-06 07-Nov-06 07-Nov-06 07-Nov-06
Corporate
Valero Energy Tel & Data Sys NRG Energy Inc Computer Scien Carnival Corp CA Inc. John Hancock McKesson Corp
Agency
S&P S&P S&P MDY S&P MDY S&P MDY
Rating
BBB BBB B+ A3 ABa1 AA Baa3
Action
U/gr fm BBB-, o/l stb D/gr fm BBB+, CWAffmd, o/l remains stb Review for downgrade Affmd, o/l remains stb Affmd, o/l remains neg U/gr fm AA-, o/l stb Affmd, o/l remains stb
Comparison
MDY MDY MDY S&P MDY S&P MDY S&P Baa3 stb Baa3 RD B1 neg A- CWA3 stb BB neg A2 pos BBB pos
Date
31-Aug-05 10-Nov-05 03-Nov-06 09-Aug-06 25-Oct-04 02-Aug-06 24-Jan-06 06-Nov-06
Credit Default Swap Markets
Single Name Credit Default Swaps – Active Names & Big Movers
Active Names
Sara Lee Corp Kroger Co/The Gap Inc/The Dillard's Inc/AR Tenet Healthcare Corp General Motors Corp Ford Motor Corp
Bid
65 33 100 150 407 425 525
Ask
69 35 110 155 427 430 530
D/D % Chg
-8% -16% 2% -6% 3% -2% -3%
D/D BP Chg
-6 -7 3 -10 12 -8 -18
W/W BP Chg
-8 -7 5 -14 -27 -33 -55
M/M BP Chg
21 -12 -2 -24 -35 -114 -123
Big Movers
Caesars Entertainment Inc Kroger Co/The MBIA Inc Union Pacific Corp Oneok Inc Duke Energy Corp Dominion Resources Inc/VA
Bid
171 33 20 16 45 17 19
Ask
176 35 24 20 50 21 23
D/D % Chg
18% -16% -15% -14% -13% -10% -9%
D/D BP Chg
27 -7 -4 -3 -7 -2 -2
W/W BP Chg
-19 -7 -1 -5 -7 -2 -5
M/M BP Chg
-11 -12 -2 -12 -9 -6 -13
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