The credit derivatives market in Europe was quiet last week in spite of some widening of retail protection prices, as traders, brokers and clients got in to the holiday mood. Dixons Group and Boots Group saw credit-default swap spreads widen several basis points, with Dixons moving out to 70 basis points from 66bps at the start of the previous week and Boots jumped to 58bps from 54bps the Monday before. Talk of private equity firms looking to bid for the U.K. retailers fuelled speculative trading.
"PLC retailers have been much better bid," said one trader, who noted the move was significant in the quiet holiday week. "Trading is very sporadic," he added, with most players looking to balance books for year end rather than making speculative trades. "There are prices up on screens, but little activity," said the trader.
Brad Bugg, retail credit analyst at Dresdner Kleinwort Wasserstein in London, noted U.K. retail groups have been coming under pressure from investors because of downbeat spending figures for this month. Most of the trading focus has been on names that could be part of a leveraged buy-out by private equity firms, he noted. Interest in Marks & Spencer (DW, 7/11) and J Sainsbury (DW, 9/24) has been well publicized and the market is sensitive to private equity interest, he added. Fitch Ratings has Boots at A minus and Dixons at BBB plus while Moody's Investors Service has Dixons on watch for a possible downgrade with a rating of Baa1, and it rates Boots A3.
