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We Love It, They Do Not Like It So Much

04 August 2017 by lberuti

Back in January, PSON ( Pearson Plc ) issued a major profit warning that led to its worst ever day on the stock market and one of the toughest its 5-year risk premium has ever experienced in the credit market. There was no such tape-bomb when the company announced its results this morning. They even came slightly ahead of analysts’ expectations, but it offers little insight given the company’s dependence on the all-important October-November trading period and equity investors decided to err on the side of caution. They were also probably a bit disappointed by the confirmation that the interim dividend would be cut 72% to 5p. This is precisely what cheered credit investors up. It confirms the cautious stance the company said it would adopt after the sale of Penguin a month ago to bolster the balance sheet. That approach also materialised in the announcement of the redemption of PSON’s 2018 notes and of a tender to purchase their USD bonds maturing in 2022 and 2023. PSON’s 5-year CDS closed 15bps tighter at 97bps.