Five-year credit-default protection on French telecom giant Alcatel widened roughly 30 basis points last week in thin trading, in what traders described as a defensive tone to the market. The company's default swaps widened to 455-505bps Wednesday in London, after a long holiday weekend. One trader attributed the widening to broader negative sentiment from the previous week and the fact that London trading is likely to be thin for the entire week given the Jubilee celebrations and the much-anticipated World Cup match between England and Argentina. "Everyone's just being a little defensive," he noted.
Mattias Soderberg, a credit analyst at JPMorgan in London, said despite the wider default swap spreads, the credit outlook on Alcatel has not changed. "There hasn't been any news, it's just a continuation of a nervous market." He added that comments from Swedish phone maker Eriksson that telecom infrastructure spending would still be slack until 2004 may have contributed to Alcatel's widening, but said those comments were more specific to Eriksson and should not have led to widening in Alcatel.
Moody's Investors Service rates Alcatel Baa2 and has it on downgrade watch, while Standard & Poor's has it at BBB, also on negative watch.
Five-Year Credit Protection On Alcatel