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When It Moves, It Trades

02 April 2015 by lberuti

For a while, OLN ( Olin Corporation ) had gone off the radar in creditland as the level of its 5 year risk premium had been fairly stable since last October’s roll. Nevertheless when its good February run came to an end, its CDS daily volumes increased to 25M$. Since early March, OLN’s risk premium was moving up steadily as the pace of the US economy has started to be questioned, but on the 27th March, DOW ( Dow Chemical Co ) announced a $5bln reverse Morris Trust transaction with OLN, whereby a new entity will be created into which DOW’s chloro alkali assets will be dropped and then merged with OLN. The new company will be a global industry leader with $7bln in revenues and $1bln in EBITDA. OLN’s CDS came crashing down 65bps to 130bps before eventually stabilising around 150bps, the level analysts had been anticipating at the time the operation was announced. In the process, volumes shot up $44mln per day. When it moves, it trades!