Credit-default swap spreads on Rhodia, a French chemicals company, came in 50 basis points to 525bps last week after takeover rumors triggered a flurry of protection holders unwinding their positions, according to traders. Rhodia is a well-traded name in the high-yield market, they added, and the credit attracted attention although the rumors died down later in the week when no hard evidence came to light.
One dealer noted, "Most people were skeptical of the rumors." He said, however, that players picked up on the idea Rhodia is now being seen as an improving credit and this sparked further selling of protection. The name is particularly popular with hedge funds because of its wide spread and traders reported funds were the protection holders most interested in selling.
Moody's Investors Service rates Rhodia B3 with negative outlook and Standard & Poor's puts it at single B with a stable outlook. Christine Hoarau, analyst at Standard & Poor's in Paris, said Rhodia has solved its liquidity risk problems from the beginning of the year, but it still faces challenges such as the rising prices of raw materials.
