Credit protection on U.S. satellite giant Intelsat widened last week after news that the company will be sold in a leveraged buyout hit the market. Spreads on five-year credit default swaps widened to 475 basis points last Wednesday, out from 395bps the previous week, according to a New York-based trader.
Most of the trading last week came from hedge funds buying protection on the name, said the trader. Moody's Investors Service downgraded Intelsat's senior secured notes to Ba3 from Baa3 on news of the buyout. James Veneau, v.p. and senior analyst in New York, said the downgrade was based on expectations that Intelsat's leverage will significantly increase as a result of the transaction. The increased leverage also comes at a time when the firm's satellite service telephony business is struggling, he added. Moody's has Intelsat on review for possible further downgrade.
Elsewhere, credit default swap spreads on German media company ProSiebenSat.1 Media AG tightened 20 basis points last week to 130bps from 150bps, in response to positive first half results published the previous Friday and an upgrade of the ratings outlook on the name to BB positive from BB stable by Fitch Ratings. The credit default swap move on the name was a delayed reaction, as the price remained at 150bps on Friday and Monday, before moving 15bps on Tuesday and a further five on Wednesday.
"It's an improving credit story," said an official at a German bank. "They haven't had good news like that in Germany for a long time," he added, explaining why the name tightened so significantly.
