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Derivatives

Adecco Spreads Recover From Results Delay Blow-Out

The price of protection on Adecco, a Swiss recruitment giant, came in 30 basis points on Tuesday as the market recovered from news that the firm's creditors would allow a further delay to its financial statement on the previous Friday.

The price of protection on Adecco, a Swiss recruitment giant, came in 30 basis points on Tuesday as the market recovered from news that the firm's creditors would allow a further delay to its financial statement on the previous Friday. Five-year credit-default swaps on Adecco spiked at 250bps on April 30 after rising throughout April from 85bps at the beginning of the month. Spreads on the name were continuing to tighten to around 200 bps as DW went to press on Thursday.

Despite the move in Adecco, traders reported that the market was generally quiet after the bank holiday weekend in London and there were not large volumes traded on the name. "Some people have put speculative short trades on," noted one trader, "But most [players] are sitting on the side lines, waiting for more news."

Spreads on Adecco began to widen in January, when they jumped from 45bps to 325bps over a single weekend (DW, 18/1), when the company announced its audit date would be delayed due to "possible accounting and compliance issues." The company was given a new deadline by creditors of May 3, but announced on April 30 that this would be further extended to June 18.

Moody's Investors Service downgraded Adecco to Ba1 from Baa3 on April 20, and kept the corporate on review for downgrade. Senior analyst Myriam Durand noted in the rating announcement that the company's liquidity situation is supported by significant cash balances and the operating fundamentals of Adecco have not deteriorated. Durand said, however, that a further downgrade could be triggered if Adecco's bank credit is not extended. Standard & Poor's downgraded Adecco to BB plus from BBB minus on April 19.

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