European credit spreads tightened on Thursday after a positive start to the earnings season and improving jobs data, but debt protection costs on Vivendi jumped on take-over talk. By 1440 GMT the investment-grade Markit iTraxx Europe index was at 120.5 basis points, according to data from Markit, 4.5 basis points tighter than late on Wednesday.
The Markit iTraxx Crossover index, made up of 45 mostly "junk"-rated credits, was at 757 basis points, 31 basis points tighter. The more positive tone was set after aluminium producer Alcoa posted a smaller-than-expected loss overnight, while a sharp drop in the number of US workers filing new claims for jobless benefit added to more upbeat mood.
Among single names, five-year credit default swaps on French media and telecoms giant Vivendi widened sharply by about 26 basis points to 153 basis points, Markit data showed. The company is talking to banks about acquisition financing as it continues to explore buying the African operations of Kuwaiti mobile operator Zain, banking sources said.
Banking sources pointed to Calyon as an adviser to Vivendi and a potential leader of an acquisition bridge loan. UBS is advising Zain. Credit analysts at UniCredit (HVB) said a big, and mostly debt-financed acquisition, would be credit negative for Vivendi. Vivendi is in early talks with lenders but could struggle to raise $8-9 billion in the loan market with its BBB rating and colourful history, bankers said, making fund raising in the bond market a more likely scenario.
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