The protection on Danish telecom group TDC blew out more than 50 basis points last week after the Wall Street Journal reported a consortium of private equity firms had launched a takeover bid for the company. It comes just weeks after a rival group of funds placed a similar bid on the table and opened up the possibility of a bidding war.
Five-year credit-default swap spreads on TDC swelled to 222 bps on Wednesday from 198 bps on Tuesday, when the report was released. One trader said spreads on Thursday, as DW went to press, were climbing toward 275bps after the company confirmed it had opened its books to private equity groups. "The speculation has seen the price spike," said one trader at a European house.
The first bid was reported to be from Apax Partners, Permira Advisors, The Blackstone Group, Kohlberg Kravis Roberts & Co and Providence Equity Partners, and valued TDC at around USD12 billion. They now face competition from a group including Cinven Group, BC Partners, Apollo Management and Silver Lake Partners which is believed to have offered a similar price.
"I could see they would want to get a bidding war going to get the best deal for shareholders", said Raymond Hill, analyst at Fitch Ratings in London. He added mid-sized European telecoms are flavor of the month for private equity firms, with Irish provider Eircom also the subject of leveraged buyout rumors. TDC is rated BBB plus by Fitch Ratings and Standard & Poor's and Baa1 by Moody's Investors Service.
