Five-year credit protection on chicken and beef producer Tyson Foods moved 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 to 125 basis points a week before, according to a trader. After a correction, default protection settled at around 150 basis points, he says.
The detection of the bird-flu virus in Texas led to the international bans, explains 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 Foods at triple-B minus with a negative outlook. Wesley Moultrie, an analyst in Chicago, says the negative outlook relates more to general problems of food producers than the specifics of this one credit. The poultry business is Tyson's biggest business, which makes the outbreak of bird flu a concern, he explains. The bird-flu cases compound concerns related to recent discoveries of mad-cow disease in the U.S.
In spite of these problems, consumers are continuing to purchase beef and export restrictions have not had a negative impact on overall prices, Moultrie adds, noting the E.U. does not even comprise the largest market for Tyson's international sales.
