Lear Corp.'s unsecured credit default swaps and loan-only credit default swaps tightened on billionaire investor Carl Icahn's $200 million equity investment in the auto supplier. Its CDS tightened 50 basis points to 435-445, while its LCDS tightened 10-15 basis points to 185-195. Lear's bonds gained a point; its 5 3/4% '14 notes traded up to 87 3/4.
A trader said Lear was one of the most actively traded names in the LCDS space, along with General Motors, which saw its LCDS trade at 170 basis points. Hedge funds were the main investors in the loan derivative product, said a trader.
Icahn's stock purchase gives him the right to appoint a representative to Lear's board. A Lear spokeswoman said it expects to use the proceeds from the offering for strategic investments and for increased financial and operating flexibility. In conjunction with the offering, Lear also said it expects to post net sales of $4.1 billion for the third quarter and a pre-tax loss of $60-70 million. This includes $17 million of restructuring costs and a $29 million sales loss relating to the contribution of assets of its European interiors systems division to International Automotive Components Group, Lear's venture with WL Ross & Co. and Franklin Mutual Advisers. The company completed this transaction last week (9/29). A call to Icahn was not returned.