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Credit Market Commentary: Market Derived Signal: Buyout Speculation Keeps Powering RadioShack?s Wider CDS Spreads
Standard & Poors, July 2010
Standard and Poors RatingsXpress Credit Research provides in-depth coverage of international corporates, financial institutions, insurance companies, utilities, sovereigns and structured finance programs. RatingsXpress Credit Research lets users determine the credit rating of holdings and identify key factors underlying an issuer's creditworthiness, distinguishes the different risk exposures for new and existing deals, and provides an understanding of how their analysts interpret key regulatory, political and environmental events and their economic impact.
Research Type: Commentary
Criteria articles describe the thought process and methodology Standard & Poor's analysts use in determining ratings. These commentary pieces discuss both the quantitative (economic and financial) and qualitative (business analysis and caliber of management) aspects of the analysis, as well as legal issues.
Since July 19, RadioShack's CDS spread tightened 90 bps or 23% as the chance of the company being acquired in a leveraged buyout decreased. With the shift in trend, RadioShack's CDS moved closer toward its 'BB' consumer discretionary CDS benchmark, although it remains wider than the benchmark. For the most part of the past year, its CDS spread has been tighter than the benchmark (see chart 1). In comparison with its 'BB' consumer discretionary CDS benchmark, RadioShack's CDS has rebounded from its widest gap. With the acquisition rumors, the gap has shifted from being tight to being wide of the benchmark. Its widest gap was 91 bps when RadioShack's CDS spread was 388 bps and the benchmark CDS spread was...
Companies mentioned in this report are: RadioShack Corp.