Dutch Telecom Co. Blows Out After Govt. Stake Sale
The price of credit protection on Dutch telecom company Royal KPN jumped last week, after the government sold half its 16% stake.
The price of credit protection on Dutch telecom company Royal KPN jumped last week, after the government sold half its 16% stake. Five-year credit-default swap spreads on the name widened from 57 basis points to 80 bps when the sale was announced Wednesday morning. As DW went to press Thursday, however, spreads had pulled in to a bid offer of 65/69.
The widening was exacerbated by general sector nervousness connected to mergers and acquisitions and leveraged buyout risk, dealers said. The looming holiday quiet period means KPN will likely continue to pull in closer to 60 bps. "At this stage, you still want to have a small premium for any potential LBO headlines," noted one trader. "But I'm not going short crazy on KPM or even Telekom Austria." The Austrian company has also seen its credit protection price rise in the last two weeks, after announcing plans to extend its allocation for share buybacks and dividends.