Willie Walsh, British Airways’s chief, and top Iberia executives have drawn up a list of 12 possible takeover or merger candidates to pursue once their own tie-up is finalised, reports the FT . The 12 targets, from an initial list of 40, include budget airlines as well as full-service carriers in countries including Brazil and China. Not all 12 would be pursued, and foreign ownership restrictions in some countries would hamper a deal, but “others would be possible almost immediately”, said Walsh. Speaking in Mumbai, Walsh also announced the entry of India’s Kingfisher Airlines to the Oneworld alliance in which BA is the top European member. The Telegraph notes there “may be a lot of wishful thinking”at BA-Iberia. Read more
This CDS report was written by Markit’s Gavan Nolan
Credit and equity markets enjoyed another strong session today, easily offsetting yesterday’s profit taking. The Markit iTraxx Europe index tightened well below 100bp, trading around 96bp. The Markit iTraxx HiVol index consolidated its position below 200bp at 186bp, while the Markit iTraxx Crossover breached the 650bp level. Both the FTSE and Dow have returned to 2008 year-end levels, and rising Treasury yields provided further evidence of rising risk appetite.
The strong performance was again driven by earnings, both in Europe and in North America. Credit Suisse has emerged as one of the stronger banks in Europe, and its second-quarter results supported the bullish consensus on the name. The Swiss bank posted its second consecutive quarterly profit and easily beat expectations. Its spreads have tightened considerably in recent months and were little changed after the results. Read more
This CDS report was written by Markit’s Gavan Nolan
European stock markets were subdued today as investors took profits. But their credit counterparts continued to surge tighter on bullish sentiment. The Markit iTraxx Europe index closed at 105bp, 7bp tighter on the day, while the Markit iTraxx Crossover tightened by 25bp to 662bp. The Markit iTraxx HiVol index briefly went below 200bp for the first time since September, though the Series 10 is trading round 225bp.
Widening credits were virtually non-existent, with autos, telecoms and retailers among the best performing sectors. The latter was helped by better than expected results from UK home improvement retailer Kingfisher. The company, owner of the B&Q chain, said first-quarter earnings rose to £128 million, 39% up from last year and easily beating consensus estimates. Same-store sales, a closely watched metric for retailers, rose by 3.2%, the first increased in two years. The figures, though helped by unseasonally warm weather, were impressive given the moribund conditions in the UK housing market. Read more
Two of the City of London’s biggest banks have lost their corporate broking mandates with FTSE companies, signalling the start of what could be one of the biggest shake-ups of banking relationships the City has seen. United Business Media, the events and publishing group, has dropped Merrill Lynch as its corporate broker in favour of Credit Suisse. Morgan Stanley will remain a joint broker. Kingfisher has replaced UBS as its long-term broker with Deutsche Bank, which will act jointly with Credit Suisse for the home improvement retail group. The changes come as many FTSE 100 and 250 companies review their corporate broking relationships in preparation for the difficult year ahead. Read more
This CDS report was written by Markit’s Gavan Nolan
Investment grade European credit was resilient today in the face of declining stock markets. Read more
The cost of protecting B&Q owner Kingfisher’s debt rose in morning trading on Wednesday after Standard & Poor’s rating agency revised down its outlook for the company to “negative” from “stable,” citing concerns over the “challenging” UK home improvement market.”
Kingfisher’s credit default swaps widened 10bp to 150bp, according to Deutsche Bank prices. Read more
Goldman Sachs’ private equity arm is sizing up a bid for Kingfisher this year, as the DIY retailer said it had slashed its debt and revalued its property assets, reports The Times. Although Goldman declined to comment, industry sources said it had recently been working on a possible bid for the owner of B&Q and Castorama, the French retail chain. The news came as Kingfisher, a perennial takeover candidate, yesterday said it had cut its net debt to £1.29bn from £1.35bn in the previous year, while a revaluation meant its property portfolio was now worth £3.2bn, up 9 per cent. Analysts said Kingfisher was an “obvious” target for private equity interest, in the wake of approaches for fellow retailers Alliance Boots and J Sainsbury. Read more
Next was among the biggest early movers in a relatively quiet European credit derivatives market this morning, according to traders, after the Financial Times reported rumours of a potential buy-out for the FTSE 100-listed clothing chain.
The spread on the company’s credit default swaps, which provide a kind of insurance against non-payment of corporate debt, jumped by about 9 basis points to a mid-price of about 58bp in early trade. This means the cost of protection for €10m worth of Next debt is now about €58,000 per year over a five year contract. Read more
J Sainsbury was one of the biggest movers in the European credit derivatives market this morning after the UK supermarket group’s pension deficit and it potential harm it could do to any private equity bid was the subject of a number of stories in the weekend press.
The group’s credit default swaps, which provide protection against non-payment of corporate debt, fell by 15 basis points this morning to about 110bp after weekend reports that trustees of the fund were holding talks with potential private equity bidders to try and ensure the pension deficit would be ranked ahead of other debt. Read more
European credit derivative prices reversed gains made earlier in the week on Thursday as equities came off the boil and traders viewed the relatively tight levels as an opportunity to buy protection against default.
The iTraxx Crossover index, which covers the 45 most traded non-investment grade names, was 3 basis points wider at a mid-price of 217bp compared with Wednesday’s close, which had plumbed a record low of 214bp. Read more
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