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Derivatives

Accor Tightens As Market Grinds In

Accor's five-year credit-default swaps came in six basis points to trade at 87bps on Wednesday, before retracing on Thursday, according to a London-based trader.

Accor's five-year credit-default swaps came in six basis points to trade at 87bps on Wednesday, before retracing on Thursday, according to a London-based trader. The general market tightening could be seen in the Dow Jones TRAC-X Europe index, which came in 3bps to trade at 53bps on Wednesday.

Credit protection premiums on the French company have been gradually falling since April because the hotel industry has started to recover from the post September 11 collapse in sales. Accor's like-for-like growth for the first quarter of this year compared to last year was 4.3%, according to Frederic Gits, analyst at Fitch Ratings in London. He added that the downturn seems to have reached its lowest point last year. "All the indicators are that hotels are recovering," he said, adding, "This year should be better than 2003 and the full recovery is expected for next year." Fitch and Standard & Poor's rate Accor BBB.

"The fact that the spreads are now closing shows it is moving in our direction," noted Gits. Fitch sees Accor as less risky than its peers, such as the Hilton Hotels Corp., because the French chain is less reliant on high-spending business clients and also has a cash generative services business.

Five-Year Credit Protection On Accor

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Source: JPMorgan

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