'Five-year credit protection on chicken and beef producer Tyson Foods spun wider last week after the European Union banned the import of American poultry. Credit-default swaps on the name widened to 175 basis points last Tuesday, compared with 125bps the previous Wednesday, according to a trader. After a correction the following day, spreads settled at around 150bps, he said.
The detection of the bird-flu virus in Texas led to the international bans, explained the trader. Most of the trading activity in the default swaps came from so-called fast money accounts, such as hedge funds.
Fitch Ratings has Tyson Food's on BBB minus with a negative outlook. Wesley Moultrie, analyst in Chicago, said the negative outlook relates more to general problems of food producers than the specifics of this corporate. The poultry business is Tyson's biggest business making the outbreak of avian disease, or bird flu, a concern, he explained. The problem is compounded because it follows a recent outbreak of mad-cow disease in the country.
In spite of these problems consumers are continuing to purchase beef and export restrictions have not had a negative impact on overall prices, Moultrie added. The E.U. does not comprise the largest market for Tyson's international sales. Fitch is continuing to observe the situation to see how it plays out, he said.
Credit Protection On Tyson Foods
