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It Takes Two To Move It

02 August 2017 by lberuti

The sentiment in credit market is still positive across the board. If credit indices are experiencing very little volatility, they are nevertheless managing a slow grind tighter. It comes to a large extend from a single name protection buyers’ strike. There is no immediate risk perceived on the credit quality of most companies. It takes some seriously negative news to impact any risk premium at the moment. Big moves tighter can also trigger a need for consolidation in some cases. And it usually takes a combination of the two for the 5-year CDS of a company to widen meaningfully. Such was the case of VUECIN (Vue International BidCo Plc) today. Its risk premium tightened dramatically a couple of weeks ago, when its owners were rumoured to mull an IPO. During the session, AMC Entertainment, the number 1 movie theatre chain in the US and in the world, pre-announced Q2 results that missed analysts’ estimates by a mile, and predicted a dire third quarter, suggesting that the company is yet to see an end to the disappointment at the box office. AMC has a significant presence in Europe through its London based subsidiary Odeon & UCI Cinemas Group, and this announcement does not bode very well for VUECIN. The latter’s risk premium was sent 19bps wider to 192bps and was the worst performer among the constituents of iTraxx Crossover.