The credit protection cost of BAA stood unchanged on Friday after the British airport operator rejected a hostile take-over bid led by Spanish construction group Ferrovial.
Ferrovial had flagged the 8.75 billion pounds ($15.3 billion) price as a preliminary proposal to the owner of London's Heathrow, Gatwick and Stansted airports. BAA has now rejected the same 810 pence a share price twice.
"We tightened 8 basis points when the bid was announced in the morning, but it (the CDS) stopped moving in the afternoon and this is where we are going to stay now that it has been rejected," said a trader in London.
A second trader said the CDS began tightening as soon as rumour surfaced this morning that Ferrovial was about to launch a bid.
At 1505 GMT, the five-year credit default swap of BAA was unchanged on the day at about 60 basis points. That means it costs 60,000 euros to insure 10 million euros of BAA debt against default.
The cost of credit protection on BAA fell as much as 8 basis points earlier on Friday when Ferrovial unveiled its bid formally. Despite hopes of a higher offer from equity investors, the credit market was relieved that the Ferrovial consortium did not increase its bid.
A higher bid could saddle BAA's balance sheet with more debt, thus decreasing its credit worthiness.
BAA said on Friday the hostile bid from the Ferrovial consortium, which also includes Caisse de Depot et Placement du Quebec and Singapore's GIC Special Investments, did not reflect the true value of its unique portfolio of airport assets.
Ferrovial said it had raised debt financing for the bid from Citigroup, Royal Bank of Scotland, Santander, HSBC and Calyon.
Ferrovial said the consortium was committed to "safe long-term funding" in the bond markets, and planned to consult with BAA's existing bondholders to help develop its long-term funding plans.
Ferrovial said it was offering to buy back BAA's convertible bonds due 2008 and 2009, at a price of 125.80 percent of face value for the 2008 bond and 144.90 percent for the 2009 bond.
In the cash bond market, the FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 47 basis points more than similarly dated government bonds at 1414 GMT, 0.6 basis points more on the day.
ADECCO SELLS TWO-PART BOND:
In the primary market, Swiss recruitment firm Adecco sold a two-part euro-denominated bond on Friday, the banks managing the sale said.
Adecco sold a 7-year, 500 million euro ($610 million) bond, paying a coupon of 4.5 percent, at 99.325 percent of face value to yield 67 basis points over mid-swaps, at the tight end of earlier price guidance.
It also sold a 2-year, 200 million euro floating rate note at par, yielding 23 basis points over 3-month Euribor, lead managers Goldman Sachs, SG CIB and UBS said.
In the high-yield market, rounding out an active week for issuance, Spanish gaming company Codere priced a larger-than-expected 165 million euro increase to its 2015 senior notes on Friday. The sale boosts the size of the 8.25 percent notes to 500 million euros.
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