A major debt refinancing for Germany's Cognis pushed the cost of insurance against default on the chemicals company higher on Wednesday, despite a rating affirmation by Standard & Poor's.
Five-year credit default swaps on Cognis widened 20 basis points to 324 basis points at 1415 GMT, reacting "purely and simply" to the unveiling of its refinancing plan, a trader in London said.
Cognis said it planned to raise up to 1.65 billion euros ($2.3 billion) in floating-rate senior secured notes and loans due 2013. It is offering holders of its 9.5 percent senior notes 50 euros per 1,000 euros of notes to make changes to their terms to allow the deal to proceed.
S&P affirmed its B rating on Cognis, saying that total annual interest expense savings would be about 40 million euros. British supermarket chain Sainsbury traded wider at 67.5 basis points, up 16 basis points, after market sources said Qatari investment group Three Delta was buying a block of about 250 million shares or about a 14 percent stake in Sainsbury.
"That heats up again take-over rumours and also spills over in the whole sector, so more or less the retailers names, consumer names are a little bit wider," a second trader said. Shares in the UK retailer were up 6.7 percent from Tuesday's close.
Elsewhere, CDS on Suedzucker, Germany's largest sugar producer widened 2 basis points to 23 basis points after Moody's Investors Service cut its rating on the company by one notch to Baa1 and said it might cut it again.
Moody's said it did not expect Suedzucker to be able to meet its margin and ratio targets due to weakness in the company's sugar division and what it said was a "challenging environment".
The company's hybrid bond, which was cut to Baa3, the bottom of the investment-grade category, widened around 6 basis points to 217 basis points over Bunds, a third trader said. In index trading, the iTraxx Crossover index of 50 mostly "junk-rated" credits, shrugged off disappointing US housing and consumer confidence figures, rebounding from an earlier high of 199.5 basis points to 197 basis points, leaving it 1 basis point wider on the day.
"In general, it's very very quiet. Most of the names are unchanged," the second trader said. In primary, Spanish building firm Obrascon Huarte Lain was braving the market with its debut benchmark euro bond, a day after concerns about Spanish real estate sent the country's IBEX 35 index down 2.7 percent.
Initial guidance on the five-year bond was set at around 65 basis points over mid-swaps, an official at one of the banks managing the sale said. Also in the market was Nexans, Europe's largest cable maker, with a 10-year euro bond, order books for which closed on Wednesday morning.
Fund manager Henderson Group also hit the markets, with a 175 million pound five-year bond, increased from initial expectations of 150 million pounds. The bond was priced to yield 125 basis points over gilts.