Vivendi Universal, a French media and telecommunications group, published improved first-quarter results last Thursday, causing the price of protection to fall. Five-year credit-default swaps were trading at 90 basis points on Thursday, compared to 105bps the previous week.
In the context of a quiet market, traders noted significant interest in Vivendi protection. A company announcement last Tuesday that said it is looking to buy back EUR1 billion (USD1.21 billion) of notes issued last year, also helped the rally. The positive results and talk of a bond buy back meant there were more sellers than buyers of credit-default swaps on the name, said one trader. Market players across the board were active in buying and selling protection, he added.
"The general perception is that there might be a rate rise on the way," said one trader at a German bank. The pricing move suggests the market is expecting this, he added. Standard & Poor's rates Vivendi Universal BB with a positive outlook. Moody's Investors Service classes Vivendi's senior unsecured debt as Ba3 and placed it on review for upgrade in March, pending the completion of the merger between Vivendi Universal Entertainment and NBC. The merger is likely to result in a substantial reduction of debt, according to Christian Rauch, analyst at Moody's in London. Rauch, however, noted Vivendi's diverse remaining businesses lack any clear strategy, and Canal+ has operational problems which could be a challenge.
