Computer Sciences' bonds traded up last week on reports that Lockheed Martin Corp. ended talks to buy out the company. Its 5% '13 bonds climbed to 93 from 91.78 after dropping to a low of 90 on Nov.1. Meanwhile, its 6.25% '09 bonds increased to 101.27 from 100.86. Calls to Lockheed Martin and Computer Sciences officials were not returned by press time.
Despite the bond debt falling on news of the buyout talks, Computer Sciences' ratings have remained constant. Moody's Investors Services rates the company A3. Moody's bond-implied ratings gap on the company the gap between Moody's rating on the issuer and the market implied rating based on the spreads on an issuer's bonds was -4 at press time. The ratings gap was pushed out three notches to -4 on Oct. 25 when the buyout talks first hit the market and the price of the company's bonds fell. David Munves, managing director of Moody's, said that for a company in Computer Sciences' rating category, its debt historically outperforms its peers 48% of the time when its bond implied ratings gap reaches -4.