The cost of credit protection on ThyssenKrupp rose slightly on Tuesday after Fitch Ratings said it might cut the steelmaker's credit rating after it announced it would bid for Canada's Dofasco Inc.
Five-year credit default swaps on the company rose 2 basis points, a trader said, to a 69 basis point bid, meaning it costs 69,000 euros to insure 10 million euros of the company's debt against default. That follows a five basis point rise on Monday.
Fitch Ratings said on Tuesday it may cut its BBB+ rating on ThyssenKrupp after it offered 3.5 billion euros ($4.1 billion) to buy Dofasco, topping a hostile bid by French rival Arcelor.
"Its a bit wider against the run of play," said one trader. "Overall the market feels stronger today."
The cost of default protection on GMAC, the financing arm of troubled US car maker, dropped around 15 basis points to be bid at 405 basis points, said a trader.
Elsewhere, Eircom, the Irish telecoms operator that has been in take-over talks with Swisscom, saw its default swaps widen about five basis points to 105 basis points as the fallout continued from a Swiss government announcement on Friday that it would block purchases by the Swiss operator abroad as long as it holds a majority stake.
Five-year default swaps on EMI were also about five basis points wider at 180 basis points, a trader said, after Standard & Poor's changed its outlook on the company's BB+ rating to negative, amid concern over its finances and the "unfavourable market environment."
Danish telecoms firm TDC was in focus again on Tuesday after sources familiar with the matter said on Monday that five private equity firms were close to announcing a deal to buy the company.
The cost of insuring against a default by TDC rose as much as 30 basis points before falling, traders said, to end the day 25 basis points wider at 335 basis points.
The FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 40.8 basis points more than similarly-dated government bonds at 1540 GMT, 0.4 basis points more on the day.
US consumer goods giant Procter & Gamble on Tuesday sold a larger than expected 2 billion euro ($2.36-billion) two-part bond, an official at a bank managing the sale said.
P&G sold a 1.4 billion euro 7-year bond at 99.199 with a coupon of 3.375 percent, giving a spread of 18 basis points over swaps, the official said. It also sold a 600 million euro 15-year bond at 99.835 with a coupon of 4.125 percent giving a spread of 40 basis points over swaps, the official said.
TUI AG, Europe's biggest tourism firm, set price guidance on a 1.0 billion euro three-part, high-yield bond that will partly fund its purchase of container shipping company CP Ships, a banker familiar with the sale said on Tuesday.
The sale will include a five-year floating-rate note yielding 160 to 170 basis points over Euribor and a seven-year fixed-rate note yielding 187.5 to 200 basis points over swaps, the banker said.
Veolia Environment set price guidance for two euro bonds it plans to sell to fund a buyback of up to 1.0 billion euros ($1.17 billion) of its 5.875 percent bonds due June 2008, an official at one of the banks managing the deal said on Tuesday.
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