Campbell Soup sees CDS grind wider ahead of results

Wed Aug 21, 2013 2:38pm EDT

Aug 21 (IFR) - Campbell Soup Co has seen its credit default swaps (CDS) grind slowly wider over the past couple weeks, as the US food giant gets ready to release fourth-quarter and full-year earnings next week.

The 4bp shift to 58bp, though small in absolute terms, is significant for an A2/A-/BBB+ rated company such as Campbell's , which trades significantly behind the IG20 index of CDS for investment-grade companies and is well known in the markets for being financially conservative.

The company is scheduled to release earnings on August 29.

CDS is essentially insurance purchased against a company defaulting on its debt, and a widening of the spreads indicates the market believes a default is somewhat more likely.

But while the iconic soup maker's spreads have widened, market opinion in the name seems to be cautiously positive. Analysts from Bank of America Merrill Lynch last month said they were surprised by how well the company has performed in 2013.

"Campbell's is in a better position today than it was two years ago," they said in a report.

Campbell Soup Co spreads have traded choppily of late, swinging between 45bp and 75bp over the past six months.

In February, its spreads blew out by 20bp - to 75bp, a five-year wide - over just two days as it released fiscal second-quarter results amid unsubstantiated chatter that it was a potential takeover candidate. Those rumors were swirling in the US food sector in the wake of the purchase of fellow US food company HJ Heinz.

The company recently entered the final negotiation stages for the sale of its European business to private equity firm CVC Capital Partners.