Five-year protection on Eastman Kodak widened by about 10 basis points to 95 basis points (mid-market) last week after the company announced its first-quarter results on Tuesday. The photographic supplies and equipment company reported that its first quarter profits fell to USD150 million, a decrease of 48% from the previous year's first quarter.
A credit derivatives trader in New York said there had been several small trades at around 95bps, with notional sizes of around USD5 million. A marketer in New York said there had been a few trades around 94-95bps, with average notional sizes of around USD10 million.
The trader in New York said that, since last fall, Eastman Kodak has suffered a decline in film sales. Over the same period, levels on the company's five-year protection have widened from mid-market levels of around 50bps, according to the marketer. Greg Rosen, director, credit derivatives trading at Credit Suisse First Boston in New York, said that the levels of protection on Eastman Kodak had actually tightened in the weeks leading up to the company's earnings announcement. In response to a general spread tightening among investment grade corporates, a number of players had covered their short credit positions in Kodak by selling credit default protection. Several synthetic deals recently brought to market included Eastman Kodak in their portfolios, he noted.
Another credit derivatives trader in New York added, however, that Eastman Kodak's sales have been adversely affected by the rising popularity of digital photography, and that the company is struggling in its transition from analog to digital technology. He added, however, that if Eastman Kodak can manage to increase its presence in the digital marketplace and make money, then five-year protection levels on the company should return to around 50bps, as doubts about Eastman Kodak's credit should subside. Officials at Eastman Kodak did not return calls for comment.
