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An Opportunistic Move

25 November 2014 by lberuti

Even though the momentum appears to slow a little bit in the CDS market, all indices had another positive session (with the exception of iTraxx Financial Senior which was 0.25bps wider…). The same was true for the vast majority of names, which saw their risk premia decrease across the board, and selling protection was a tough order today. One exception was NXPBV ( NXP Smeiconductors NV ). Its 5 year CDS was wider (up 2bps at 148bps), and the bid was relatively deep on the back on their $1bln convertible bond issue. The proceeds will be used to purchase stocks and repay existing loans. But if you take a few steps back and look at the 5 year CDS run over the last few years, you will see that the timing of the company is not that bad. The risk premium of NXP has never been that tight. The stock is also trading at its all-time high on the NASDAQ, and interest rates have never been that low. All in all, it is fair to say that the issue of convertible notes probably make sense… for them.