Five-year credit protection on Eastman Kodak moved in last week following the firm's issuance of USD1 billion in convertible notes and 10-year bonds. Credit protection on the corporate tightened to 210 basis points last Wednesday from 210bps seven days previously, said a New York-based trader. Much of the bond issue was bought by credit derivatives traders because the bonds were trading cheap relative to default swaps, he noted.
Eastman Kodak has now found its trading range and protection on the name is likely to remain steady, the trader predicted. Kodak has been volatile over the past several weeks, following an announcement by the firm on Sept. 25 that it will focus more heavily on digital imaging, he said. Protection on the name had traded as low as 120bps early last month, he noted.
Steve Wilkinson, analyst at Standard & Poor's in New York, noted that while Kodak is a leader in traditional photography products and services the corporate faces increasing business risk through its transition to digital technologies. The photography-giant will need to limit its decline in earnings before interest, taxes, depreciation, and amortization (EBITDA) in the second half of this year in order to maintain its rating. The generation of meaningful discretionary cash flow and steady progress in reducing the firm's gross debt is also necessary. Standard & Poor's rates Eastman Kodak BBB minus and has it on stable outlook.
Five-Year Protection On Eastman Kodak
Source: CreditTrade
