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The Devil Is In The Details

13 November 2014 by lberuti

Yesterday ABGSM ( Abengoa SA ) published quarterly results which were at first glance broadly in line with what people were expecting. Hence dealers opened the name unchanged. But when investors begun to comb the reports, they realised that the company had tweaked somewhat their reported leverage which stood at 2.1x. Indeed it includes €250mln proceeds from a disposal which are yet to be collected and it excludes €500mln of ABG Greenfields bonds which the company considers to be non-recourse despite their guarantee by ABGSM. That put ABGSM right into the spotlight and their bonds were indicated 6 to 7 points lower while the 5 year risk premium traded skywards, up 250bps to roughly 1000bps (in fact 16 points upfront plus 500bps running). That only adds to the recent increase in dispersion, which has translated into an unusually negative basis for the on the run series of iTraxx Crossover.