Five-year protection on Rhodia, the French chemicals company, widened 40 basis points last week, after a Les Echos article on Tuesday alleged there is a liquidity crisis at the corporate. Credit-default swaps on the name widened to 650 basis points last Wednesday, from 610bps on Monday. Volumes, however, did not rise notably in spite of the change in spreads, commented a trader at a German bank.
A credit analyst said the newspaper picked up on data filed by Rhodia with the Securities and Exchange Commission at the end of December and said the market's reaction was likely prompted by French firms holding protection on Rhodia. The corporate has not issued any new information about its liquidity status and its debt refinancing plan still remains unresolved, explained the analyst. Rhodia is expected to publish first quarter results in May, and the deadline for the refinancing plan is the end of June.
Standard & Poor's downgraded Rhodia to B from BB minus and placed it on CreditWatch negative in December because the company's cash flow was stretched. Nicholas Baudouin, analyst at S&P in Paris, said, "We will update the ratings when we know more about the refinancing program." The corporate needs to finalize refinancing details as soon as possible to settle concerns about its liquidity, he added.
Five-Year Credit Protection On Rhodia
