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What’s The Big Deal?

05 February 2018 by lberuti

With the S&P500 experiencing its worst day since September 2016 on Friday, the price action in credit was unsurprisingly weak first thing this morning. As far far as FCAIM ( Fiat Chrysler Automobiles ) was concerned, the effects were compounded by articles suggesting that the company might have to pay larger than expected fines to settle the emissions-cheating lawsuit brought by the US Department of Justice. The latter would have extended a settlement offer that would include the recall of more than 100,000 vehicles and the payment of “very substantial civil penalties” which investors now estimate in the $1.6-22.2Bln range. That initially send FCAIM’s 5-year risk premium 15bps wider to almost 160bps. But after due consideration, people estimated that the sums involved should not derail the automaker’s efforts to strengthen its credit profile and cut leverage. They were actually comforted in their position later in the day when S&P upgraded FCAIM’s credit rating from BB to BB+. The company’s 5-year CDS ended the session unchanged at 143bps.