Default swaps on GMAC, General Motors' finance arm, rose on Thursday, after the United Auto Workers union said it was not close to a cost-cutting agreement with GM and bankrupt supplier Delphi Corp.
The cost of insuring debt in General Motors Acceptance Corp against default rose after the UAW contradicted media reports that a deal was in the offing that could help Delphi cut its union staff and pay remaining workers a lower wage, while encouraging thousands of workers to take early retirement.
"Nothing could be further from the truth," the UAW said on its Web site. "There are many, many, significant issues to be resolved."
Five-year credit default swaps on GMAC rose as much as 25 basis points from the day's lowest level to 465 basis points, a trader said, meaning it costs 465,000 euros to insure 10 million euros of the company's debt against default.
Elsewhere, default swaps on Dutch market research firm VNU fell in price, as investors awaited more signals on whether a 7.5 billion euro private equity bid for the company would succeed.
VNU accepted the bid from six private equity firms on Wednesday but the deal received an icy reception from shareholders. Fidelity International, which owns around 15 percent of the market research firm, said it was unlikely to support the offer.
Five-year default swaps on VNU tightened 10 to 15 basis points, bid at 185 basis points, a second trader said, after swinging between 200 and 260 basis points on Wednesday. "Everyone is waiting for the next news on VNU, no one wants to dive in at the moment," the trader said.
Bondholders fear leveraged buyouts as the private equity buyers finance the deals by piling debt onto the balance sheet of the target company.
In retail, the cost of insuring debt in Carrefour, the world's second-biggest retailer, was unchanged after Standard & Poor's cut its credit rating on the company one notch to A on Carrefour's plans to accelerate its expansion plans.
In the wider market, the FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 48.8 basis points more than similarly dated government bonds, 0.2 basis points less on the day.
After weakening on Wednesday as worries about emerging markets knocked risky assets such as high-yield bonds, the iTraxx Crossover index, used as a barometer of sentiment in the high-yield market, was trading at 254 basis points, 2 basis points lower on the day.
"With stocks bouncing overnight and US Treasuries stabilising, the market's regained a bit of confidence," said a cross-over trader in London.
The primary market continued to hum with activity; carmaker DaimlerChrysler sold a 1.25 billion euro 7-year bond, while Dutch telecoms company KPN set spread guidance on its planned two-part, 1 billion euro bond.
DaimlerChrysler's bond was priced to yield 71 basis points over swaps, the lead managers said, after a banker familiar with the sale said it received orders from investors of more than 1.5 billion euros.
And KPN, the Netherlands' dominant telephone company, will sell euro and sterling bonds on Friday, worth a total of 1 billion euros, an official at one of the lead managers said.
KPN will sell a 7-year euro bond, priced to yield 95 to 100 basis points over swaps, and a 10-year sterling bond, yielding 140 to 145 basis points over UK government gilts.
KPN's deal will refinance euro bonds maturing in April and July and will fund general corporate purposes and extend the group's debt maturity profile.
Comments
Comments are closed.