13 February 2014 by HCM
In the world of equities, when a company is the subject of corporate activity and is a takeover target, the only way is up. It is a different story in credit. Yesterday we have seen that MRWLN (Wm. Morrisson Supermarkets Plc) ’s risk premium increased significantly after investors speculated the company could interest private equity group and could be leveraged. Today TWC (Time Warner Cable Inc) was taken over by Comcast in an all stock $45bln deal, and TWC’s risk premium came crashing down (its 5 year CDS traded down from 182bps to 75bps), as it was brought in line with Comcast’s. Equity and credit do not necessarily move in perfect harmony.