Five-year credit-default swap spreads on El Paso Corp. drew in to historical tights last week on rumors the U.S. energy company may be upgraded. The price of protection on El Paso pulled in to about 217 basis points Thursday from 254 bps the week before and has tightened 80-100 basis points since the beginning of the year.
El Paso's bid/offer was 205/215 bps Thursday as bond holders bought up cheap protection. "El Paso is a massive holding for real-money accounts and also hedge funds," a trader said. "Everyone's involved in this."
Standard & Poor's has maintained the agency's B minus rating since the summer. "The company has made considerable progress over the last few months," said Ben Tsocanos, associate director, referring to El Paso's completed restructuring program and improved liquidity. "They have done a number of things we were looking for them to do, but cash flow is still not at levels we'd like."
Moody's Investors Services has not changed its rating or outlook on El Paso in 11 months, since it reaffirmed its B3 rating and stable outlook.
