XTO Bonds And Credit Default Swaps Strengthen On Exxon Deal
2009年12月15日 - 7:00AM
Dow Jones News
XTO Energy Inc. (XTO) bonds and credit default swaps rallied
sharply Monday as Exxon Mobil Corp. (XOM) announced a deal to buy
the natural gas company for $31 billion.
The acquisition, the largest transaction in the energy industry
in eight years, also includes debt. With Exxon one of the four U.S.
non-financial companies carrying the top credit rating of triple-A,
and with XTO bonds rated toward the bottom of the investment-grade
ladder, the news was a boon to XTO bond holders.
The XTO deal fueled speculation on other possible acquisitions
in the energy sector, and risk premiums, or spreads, on bonds from
other companies strengthened by five to 10 basis points.
"It firmed up the market," said Mirko Mikelic, portfolio manager
at Fifth Third Asset Management in Grand Rapids, Mich.
The risk premium on an XTO 6.5% bond plummeted by 63 basis
points to 65 basis points over Treasurys, according to online
trading platform MarketAxess.
Meanwhile, the annual cost of protecting XTO senior bonds
against default, an important gauge of creditworthiness, fell to
$21,000, compared to $80,000 on Friday, before the deal was
announced, according to credit default swaps levels from CMA
DataVision.
At such levels, CDS traders are treating XTO as a triple-A rated
company, while on Friday the rating implied from its CDS was Baa1,
according to Moody's Market Implied Ratings service.
"XTO's pending acquisition by Exxon Mobil Corporation means far
easier access to capital," wrote Gimme Credit analyst Philip C.
Adams. He added the deal also gives XTO "unquestionable resiliency
in pursuing unconventional natural gas resources despite current
weak natural gas prices."
Exxon has little outstanding debt, and its financial position is
attractive to bond holders who value safety. "It's crazy how much
revenue and free cash flow they generate," Mikelic said.
-By Romy Varghese, Dow Jones Newswires; 215-656-8263;
romy.varghese@dowjones.com
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