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A Good Equity Fix

23 January 2018 by lberuti

Credit is still finding it incredibly hardly to widen at the moment. Since the beginning of the week, it was helped by equities continuing their march higher and news that the US senate voted to end the Government shutdown (even if it has to be said that news of the shutdown did not really put any kind of pressure on credit last Friday). The same is true at a micro level, and most corporates saw their risk premia tighten over the last couple of days. In the investment grade universe, one name stood out though. FE ( CArrefour ) was the biggest mover. Its stock jumped 10% on the back of a $2.5Bln equity investment by a group including Elliott Management Corp, Bluescape, Singapore’s sovereign wealth fund, and Zimmer Partners. This cash injection will be used to reduce FE’s debt by roughly $1.5Bln which should clearly be credit positive. Additionally, they are forming a “restructuring working group” that will try to expedite the exit from the merchant generation business and get FE to the point where it is a fully regulated utility. FE’s 5-year risk premium moved 12bps tighter on the back of these headlines since yesterday and traded actively from 77bps to 65bps.