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24 February 2014 by HCM

The retail space is subject to a lot of activity in the UK and in the US. After, Wm. Morrison Supermarkets Plc (MRWLN) ) buyout rumours, the news flow is again significant today on this sector. The sector is going through an active consolidation and restructuration while earnings are not good.

Carphone Warehouse PLC is in preliminary talks to merge with DIXONS RETAIL PLC (DXNSLN). This is credit positive for Dixons CDS as it can be orphan or eventually trade into Carphone which has much less leverage.

Cerberus is said to be lead Safeway Inc. (SWY) bidder. The CDS is 50 bps wider. The news came after the London close Friday and the movement is only reflected today into DataGrapple.

New Albertson’s, Inc (ABS) CDS is 90bps tighter. This is a LBO CDS. Cerberus owns the company and the market is speculating on synergies with SWY, ABS could trade closer to SWY.

J.C. Penney Company, Inc. (JCP) CDS is 1.5% upfront wider pre earnings release. JCP is a member of IG9, an off-the-run index, underlying of many CDO hedges. The volatility on JCP could be significant.

Dillard’s, Inc (JCP) CDS is 25 bps wider post weak earnings. The gross margin is declining on weaker sales.