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Vivendi Spreads Blow Out On Downgrade News

04 Jul 2002

Credit-default protection on Vivendi Universal rocketed over 400 basis points wider on Tuesday morning in London as Moody's Investors Service announced a downgrade of the media company's long-term debt to Ba1 from Baa3. Swap spreads for five-year protection on Vivendi closed Tuesday at approximately 1,100 basis points, compared to 640bps in the morning, said traders.

Default swap spreads on other telecom names widened as well, including five-year protection on France Telecom, which blew out to 600-650bps from 560-610bps, before settling at 586bps. Deutsche Telekom also saw a 30bps jump to 390bps.

Traders said the volume of tickets traded on Vivendi were approximately double typical volumes, with five to 10 trades going through a day. However, they said the average size of trades has dropped off over the past month, from about EUR5-10 million (notional) to EUR2 million.

04 Jul 2002

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