21 July 2014 by HCM
For a long time, DXNSLN (Dixons Retail Plc) was a company everybody loved to hate in terms of credit. At one stage, it used to be on everybody’s list of LBO targets because of its once extensive network of retail centres. Then its business model was questioned because of the competition from internet retailers. But a new management team was brought to the company a few years ago, and the turnaround was fairly impressive. It recently culminated with the proposed merger with Carphone Warehouse Plc. During the last few years, the deleveraging has been steady, and it was brought to a conclusion today by the redemption of DXNSLN’s last 2 outstanding bonds which were originally due to mature in 2015 and 2017. If the operation is successful, it will leave the company without any traded debt. The CDS market acknowledged that, and DXNSLN’s 5 year risk premium dropped almost 30bps to 78.5bps. But it is not worth 0. The buyers of protection are either cutting long risk positions initiated earlier or they are betting that some more debt could be issued at a later stage from this entity.