British cable operator NTL rallied modestly in the European corporate bond market on Monday after it unveiled a bid for Virgin Mobile, but elsewhere activity was limited by the impending holiday season.
The cost of insuring against a default by NTL fell after it offered to pay 817 million pounds ($1.4 billion) for Virgin Mobile, aiming to create a TV, Internet, fixed-line and mobile phone powerhouse under Richard Branson's Virgin brand.
Five-year default swaps on NTL rallied 10 basis points to 340 basis points, a trader in London said, as there was relief the deal was to be largely equity-financed. But there was little active trading.
"The announced bid by NTL Inc for Virgin Mobile may enhance NTL's long-term strategic position, but has little immediate effect on the credit profile of NTL," credit ratings agency Fitch Ratings said in a statement.
Fitch said it estimated NTL might have to pay out at most 200 million to 300 million pounds in cash related to the deal. The agency said it might still cut NTL's BB- rating by one notch due to its previously announced merger with Telewest.
Elsewhere, credit default swaps on General Motors finance unit General Motors Acceptance Corp (GMAC) came under pressure after Wells Fargo & Co Chief Executive Richard Kovacevich said the bank had no interest in buying GMAC.
GM plans to sell a majority stake in GMAC to a highly-rated institution in order to lift the finance unit's credit rating back to investment-grade status.
Five-year default swaps on GMAC widened 25 basis points to 510 basis points, another trader said. But in the broader market, the approach of the end of the year was starting to make itself felt.
Others agreed. "I hope I'm wrong, but if I had to make a call, I'd say today was the day the market said that's it for the year," said a trader.
The FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 41.1 basis points more than similarly dated government bonds at 1614 GMT, 0.7 basis points more on the day.
Coca-Cola Enterprises Inc set price guidance on its planned 18-month, benchmark-sized floating rate euro note, and 3-year 350 million euro bond, a banker familiar with the deal said.
The FRN will be priced to yield 10 to 12 basis points over three-month Euribor, while the 3-year bond will be priced in the area of 20 basis points over mid-swaps, the banker said. The deal is via wholly-owned unit CCE Investments Commandite SCA.
BNP Paribas and HSBC are managing the sale of the FRN, which will be non-callable for 12 months, while the two banks and CSFB are managing the 3-year deal, a second banker said earlier.
Atlanta-based Coca-Cola Enterprises, the world's largest bottler of Coca-Cola beverages, is rated A2 by Moody's Investors Service and A by Standard & Poor's.
And sanitation, pest removal and maintenance services company Ecolab Inc plans to exchange some of its euro bonds due 2007 for new bonds due 2012, the banks managing the exchange said. Ecolab plans to exchange up to 200 million euros ($234 million) of its 300 million 5.375 percent bonds due 2007 for new fixed-rate 2012 notes, Barclays Capital and J.P. Morgan said. Ecolab will issue 300 million euros of new notes, they said.