28 November 2016 by pdonnat
CAG ( Conagra Brands Inc. ) was a 12BUSD revenues food US company based in Chicago. On November 9, 2016, the company completed the spin-off of Lamb Weston - essentially its frozen potato fries business (a 4BUSD revenue business). French fries and any sort of fried potatoes is a sound investment. Half of the debt of Conagra was pushed to the new company LW (( Lamb Weston Holdings Inc. ). From a BBB- company, the new Conagra is now BBB while Lamb Weston is a BB. According to last Friday’s ISDA determination committee, a CDS holder having 1MUSD protection on CAG is now having 500k on new CAG and 500k on LW. New CAG is indicated 20bps tighter while LW is 40bps wider. CAG is also a member of the investment grade credit indices in the US, the CDX.IG, in all series up to the latest the series 27. All credit indices members will also be split and will have 126 reference entities, CAG and LW being half weighted. This credit event is a source of large operations for credit derivatives trade processing in the next days.
Meanwhile, the broader credit market went through a slow session with European investment grade risk being the weakest part of the investment spectrum.