Sept 11 (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.
Additional information about Fitch Solutions' products is available in the link