Debt in Dutch market research giant VNU endured a volatile session on Wednesday, buffeted by rising and falling fears it would fall into private equity hands, while syndicate desks worked frantically on a slew of new bond sales.
Credit default swaps on VNU jumped in price after it said it had agreed to be bought out by private equity firms, but then fell sharply after a key shareholder said it opposed the deal.
Five-year credit default swaps on VNU initially rose sharply to be bid at a high of 260 basis points, before falling to trade 25 basis points tighter on the day, bid at 193 basis points, dealers said.
VNU said it agreed to a buyout offer of 28.75 euros per share from six private equity firms, valuing it at about 7.5 billion euros ($8.94 billion) excluding debt.
But one investor, Knight Vinke Asset Management, said it would reject the offer and it had asked the company's board to let shareholders vote on a new sale process. Many shareholders think a higher price could be achieved by breaking up the company.
The buyout group includes Blackstone Group, Carlyle Group, Kohlberg Kravis Roberts & Co, Hellman & Friedman, Thomas H. Lee Partners and AlpInvest Partners.
Private equity deals hurt bonds because the buyer often funds the deal by issuing debt in the target's name, making it less creditworthy.
Five-year credit default swaps on Pilkington Plc widened 12 basis points, to be bid at 72 basis points, a dealer said, after talk late on Monday that the company would provide a guarantee for new financing in its take-over by Nippon Sheet Glass.
Nippon Sheet Glass (NSG) is raising a 1.8 billion pound ($3.13 billion) loan via target Pilkington to finance its purchase of the 80 percent of the British glassmaker it does not already own.
The financing will be raised as Pilkington debt. Banks will lend to an intermediary holding company and the loan will not have recourse to NSG, a banker told Reuters LPC on Monday.
Credit ratings agencies Moody's Investors Service and Standard & Poor's cut their ratings on Portugal Telecom one notch, to BBB+ and Baa1, on PT's dividend plan, which is intended to defend the company against rival Portuguese conglomerate Sonae's hostile take-over bid.
The cost of insuring Portugal Telecom's debt against default was little changed on the news, dealers in London said, with five-year credit default swaps bid at 150 basis points.
"The downgrade was already priced in, and it's still investment grade. If the bid goes through, it's sure to be downgraded further, so it's already trading wide," one dealer said.
In the wider market, the FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 49.0 basis points more than similarly dated government bonds at 1643 GMT, 0.1 basis points more on the day.
A hectic primary market saw larger-than-expected deals from European satellite giant SES Global and British American Tobacco, as well as new bonds from British utility National Grid and a unit of Japanese carmaker Honda Motor Co.
Germany's Siemens was also set to price a two-part, $1 billion eurodollar deal, an official at one of the lead managers said, while carmaker DaimlerChrysler AG mandated banks for a 1 billion euro-plus 7-year deal.
In the high-yield debt market, cash bond prices dropped by around 1 percentage point across the board and the iTraxx Crossover index retreated from the tight levels it achieved earlier this week, echoing weakness in emerging market debt.
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