Fitch Solutions: CDS, Liquidity Diverges for Alcoa & Asian Retailers

NEW YORK & LONDON--(Business Wire)--
While spreads are narrowing among one of North America's largest metal companies
and various retailers in Asia, liquidity among these entities is traveling in
very different directions, according to Fitch Solutions in its latest update on
Global CDS Spreads/Liquidity Scores for companies scheduled to come out with
earnings announcements in the coming week.

While credit spreads for ALCOA Inc. have tightened sharply in recent weeks,
liquidity has also increased. ALCOA is now trading in the sixth percentile up
from the 10th, with a CDS liquidity score of 7.38. "Recent negative U.S. and
Euro zone employment data suggests a delayed recovery in demand for metals from
the construction and manufacturing sectors," said Author and Fitch Solutions
Managing Director Thomas Aubrey.

This divergence in CDS and liquidity was also evident for two Japanese retailers
scheduled to report earnings. "Whilst AEON's CDS liquidity improved from 12.57
to 10.50 during the past three months, Fast Retailing - operator Japan's Uniqlo
clothing chain - became less liquid, illustrating market expectations that,
despite the consumer slowdown, the company will benefit from increased demand
for its clothing range," said Aubrey.

In general, the liquidity of a credit derivative asset increases when it is
showing signs of financial stress in combination with a significant amount of
debt outstanding and/or changes in its capital structure, including new
issuance. The liquidity scores of assets have historically traded between four
at the most liquid end, through to 29 at the least liquid end.

North America:

ALCOA Inc.

Credit spreads have tightened sharply over the last three months with the
five-year point tightening from 747 basis points (bps) to 432 bps, a decrease of
42%. Despite this tightening of spreads, liquidity on ALCOA Inc. increased
sharply from trading in the 10th percentile to the sixth percentile with its
liquidity score increasing from 7.53 to 7.38 over the three-month period. This
highlights the increased uncertainty amongst industrial companies of when future
demand is expected to pick up again.

Pepsi Bottling Group, Inc.

Credit spreads have tightened over the last three months with the five-year
point tightening from 83 bps to 60 bps, a decrease of 28%. Despite of tightening
of spreads, liquidity on Pepsi Bottling Group Inc. increased significantly from
trading in the 62nd percentile to the 48th percentile. Its liquidity score
increased from 9.91 to 9.15 over the three-month period which is partially
driven by the company's plan's to raise capital for a $1 billion investment in
Russia.

The Progressive Corporation

Credit spreads have tightened over the last three months with the five-year
point tightening from 151 bps to 108 bps, a decrease of 28%. Despite this
tightening of spreads, liquidity on the Progressive Corporation increased
slightly from trading in the 89th percentile to the 86th percentile. Its
liquidity score increased from 13.43 to 12.62 over the three-month period.

Shaw Group, Inc.

Credit spreads have tightened slightly over the last three months with the
five-year point tightening from 213 bps to 184 bps, a decrease of 13%. In
conjunction with this tightening of spreads, liquidity on the Shaw Group Inc.
decreased slightly from trading in the 83rd percentile to the 85th percentile.
Its liquidity score decreased slightly from 12.18 to 12.29 over the three-month
period.

Asia:

AEON Co., Ltd.

Credit spreads have tightened sharply over the last three months with the
five-year point tightening from 369bp to 125bp, a decrease of 64%. Despite the
tightening of spreads, liquidity on AEON Co., Ltd. increased significantly from
trading in the 52nd percentile to the 33rd percentile. Its liquidity score
increased from 12.57 to 10.50 over the three-month period, signifying heightened
uncertainty within the Japanese retail sector. As the consumer demand on
non-food items continue to dip on the back of economic downturn, Aeon Co,
country's second largest supermarket operator, along with many other Japanese
retailers, are trying to tackle the problem by slashing prices, opening discount
stores and closing unprofitable branches.

Fast Retailing Co., Ltd

Credit spreads have tightened over the last three months with the five-year
point tightening from 107 bps to 61 bps, a decrease of 43%. In conjunction with
this tightening of spreads, liquidity on Fast Retailing Co., Ltd decreased from
trading in the 36th percentile to the 60th percentile. Its liquidity score
decreased from 11.16 to 11.94 over the three-month period. Despite the economic
downturn and Japan's shrinking domestic consumption, the operator of Japan's
Uniqlo casual clothing chain is anticipated to benefit from heightened demand on
its inexpensive but high-quality products.

Fitch Solutions, a division of the Fitch Group, focuses on the development of
fixed-income products and services, bringing to market a wide range of data,
analytical tools and related services. The division is also the distribution
channel for Fitch Ratings content. Fitch Solutions' product offerings include
Fitch Ratings' research delivery, risk and performance analytics, surveillance
tools, structured finance workflow solutions, and pricing and valuation
services. The division's service offerings include Fitch Training, a specialist
training firm for financial professionals, and Advisory Services, which provide
customized consulting to help clients better understand their risk.

The Fitch Group also includes Fitch Ratings, a global rating agency dedicated to
providing the world's credit markets with independent and prospective credit
opinions, and Algorithmics, a leader in enterprise risk management solutions.
The Fitch Group is a majority-owned subsidiary of Fimalac, S.A., headquartered
in Paris, France. For additional information, please visit www.fitchratings.com;
www.algorithmics.com; and www.fimalac.com.

Fitch Ratings
Thomas Aubrey, +44 (0) 207 682 7226 (London)
Jonathan Di Giambattista, +1-212-908-0273 (New York)
Peter Fitzpatrick, + 44 (0)20 7417 4364 (Media Relations, London)
peter.fitzpatrick@fitchratings.com
Sandro Scenga, +1-212-908-0278 (Media Relations, New York)
sandro.scenga@fitchratings.com
Shivani Sundralingam, + 65 6796 7215 (Media Relations, Singapore)
shivani.sundralingam@fitchratings.com

Copyright Business Wire 2009