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May 8 (The following statement was released by the rating agency)
Takeover speculation involving AstraZeneca Plc and Pfizer is leading to two very different sentiments with respect to credit default swap (CDS) spread movement, according to Fitch Solutions in its latest CDS case study snapshot.
While five-year CDS on AstraZeneca have tightened 21% in the past month, Pfizer's CDS have widened 28%. 'Credit protection for both pharmaceutical giants is still pricing strong, though market sentiment appears to be improving for AstraZeneca and souring for Pfizer,' said Director Diana Allmendinger.
Part of the reason may be AstraZeneca's announced aggressive revenue targets in an effort to ward off a potential Pfizer takeover. Conversely, 'the markets are anticipating that Pfizer would likely have to take on debt to acquire AstraZeneca, which would stress its leverage ratios,' 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 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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