The cost of protecting Alliance Boots‘ debt against default jumped this morning on the back of reports that US private equity firm Blackstone was planning a counterbid for the UK-based high-street chemist chain.
The spread on Boots’ credit default swaps, which provide a kind of insurance against non-payment of corporate debt, rose about 10bp to a mid-price of about 150bp, according to traders. This means it now costs €150,000 per year to protect €10m of the company’s debt against default over five years.
London’s Daily Telegraph reported today that Blackstone was considering a possible counter-offer for the chain after the board rejected a £10-per share offer from executive deputy chairman, Stefano Pessina.
Takeover rumours also hit the cost of protection for ITV this morning. Talk of a potential bid from Virgin Media, the recently combined interests of Richard Branson’s Virgin and NTL the cable company sent the spread on the independent broadcaster’s CDS 5bp wider to about 84.5bp.
In the indices broadly, analysts said recent low-level volatility was likely to remain for as long as their continued to be concerns over the US housing market, uncertainty about the outlook for the US economy and jitters over political tensions with Iran.
The iTraxx Crossover index of mainly junk-rated European debt, which has continued to see most of the action, opened a touch stronger this morning with its cost of protection about 2bp tighter at about 230.5bp. The other European indices were little changed today so far.
Overnight in the US, the rise in oil prices due to Iran related worries hit the cost of protection on Continental Airlines – up 28bp at 519bp, according to Markit Group – among others. There were also continuing problems for US homebuilders with Hovnanian Enterprises, KB Homes and Standard Pacific among those to see CDS spreads leaping wider.