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Yes… But No… But Yes

13 December 2016 by lberuti

Yesterday’s point on LINDOR’s (Lock Lower Holding AS, the holding company owning Lindorff) 5-year risk premium graph is not the result of poor data quality. On Monday morning, a representative of one the main shareholders of Intrum Justitia AB – the Swedish debt collector which should merge with its Norwegian rival – said that the terms of the deal were not good enough for them to support the transaction. All of a sudden, the odds of LINDOR being an orphan appeared to be seriously cut and its 5-year CDS jumped 112bps wider to 287bps. Overnight, the parties involved in the discussions went back to the negotiation table though and eventually decided to sweeten the terms of the 17.9-billion-krona merger for the owners of the Swedish company. The latter will receive 55% of the combined entity rather than the 53% proposed initially, enough to convince the fractious stakeholders. When the agreement was made public, LINDOR’s 5-year risk premium swiftly went back to the levels at which it was trading last week and closed at 170bps. Meanwhile, the broader credit market benefitted from the positive tone set by the Italian banking sector on the back of UCGIM’s ( UniCredit SpA ) capital increase. iTraxx Main closed 1.5bps tighter at 71bps, iTraxx Crossover 8bps tighter at 294 and CDX IG 1bp tighter at 67bps.