The price of credit-default swap protection on Hong Kong telecom giant PCCW more than doubled last week on the back of competing proposals to buy core assets, with a flurry of trades hitting the market.
Macquarie Bank and Newbridge Capital are in talks with Hong Kong's largest phone company to purchase telecommunication and media assets valued in the billions of dollars. "The assumption is that there will be a leveraged buy-out which will increase the level of debt to assets," said a credit trading head at a U.S. house. Five-year CDS blew out to a mid-market of 110 basis points late last week from around 50 bps the week prior. Traders noted this is the widest the name has traded in three years, as it was quoted at over 200 bps around the time of SARS but since then has steadily grinded in.
Credit dealers said over 40 trades on the default swap went through the market on PCCW last week, whereas it typically trades a handful of times per week. "There's been a real mixture of trades," said the trading head, explaining banks and end users were unwinding positions, placing curve plays, as well as just buying protection.
