01 March 2016 by pdonnat
Valeant CDS was not trading up to September 2015 while the company has more than 19BUSD of bonds outstanding. The CDS has been included as one of the 100 members of the CDX.NA.HY.25 credit index, the US High Yield credit index. The CDS has started to trade with the only sellers of CDS protection being the index arbitragers. The CDS movements have been rather erratic since September like Valeant equity. Yesterday, with SEC investigation, Moody’s watch negative, the 5Y CDS indicates a 43% probability of default over the next 5 years from 34% the day before. A default will add a lot of pressure on high yield investors who are already facing larges losses on the energy complex.