Sept 11 (Reuters) - (The following statement was released by the rating agency)
Verizon Communications’ proposed deal with Vodafone Group, Plc have sent the company’s credit default swap (CDS) spreads to their widest level since 2010, according to the latest case study from Fitch Solutions.
CDS for Verizon have widened 38% over the past month alone. ‘Verizon’s plans to acquire Vodafone’s U.S. group, thereby increasing the company’s leverage, as well as higher debt levels, are likely contributing to the growing market concern,’ said Director Diana Allmendinger. CDS levels are indicating that the market is now pricing Verizon at ‘BBB+’ levels.
Additionally, CDS liquidity for Verizon has been increasing steadily since February, signaling higher market uncertainty. Verizon has vaulted from trading in the 31st global percentile to the fifth. ‘Verizon CDS are now trading with more liquidity than 95% of our pricing universe,’ said Allmendinger.
Fitch Solutions case studies build on data from its CDS Pricing Service and proprietary quantitative models, including CDS Implied Ratings. These credit risk indicators are designed to provide more real-time, market-based views of creditworthiness. As such, they can and often do reflect more short term market views on factors such as currencies, seasonal market effects and short-term technical influences. This is in contrast to Fitch Ratings’ Issuer Default Ratings (IDRs), which are based on forward-looking fundamental credit analysis over an extended period of time.
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