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M&A, Main Source Of Action In The US

13 May 2014 by HCM

Over the last week, the credit market in the US has been very stable, especially in the investment grade universe. The fair value of the CDX IG 5y series 22 has barely moved, going from 63.1bps to 62.7bps. This index has moved a tad more quickly as the basis is now in negative territory and heads towards the 20cts level. But that stability at a macro level masks some dispersion when you drill down to individual companies. If most of the names were well behaved, others have experienced wild swings on the back of M&A activity. SLE (Hillshire Brands Co) was the main casualty after the company announced their intention to acquire Pinnacle Foods Inc for $6.6bln raising questions regarding their future leverage and pushing the 5 year CDS 55bps wider, from 87.5bps to 142.5bps. At the other end of the spectrum, DTV (Direc TV) was the star performer after SBC (AT&T Inc) said they are in talks to acquire the largest US satellite-TV provider, sending its 5 year risk premium 29bps tighter from 85.5 to 56.5bps.