CONSUMER STAPLES: Nestle; bidders line up for water business
(NESNVX; Aa3/AA-; stable)
Bloomberg is reporting PE players are lining up for the water business at reported valuation of ~€5b. Co said on the last earnings call (13th Feb) it was looking at partnerships not a "outright sale". Water includes brands like San Pellegrino, Perrier and Acqua Panna.
It is not quiet a credit mover at CHF3.2b in revenues (3.5% of group) and much smaller margins (1.9% of group profits). But what it does with any proceeds may be - at net 2.9x co is near top-end of its 2.0-3.0x leverage target - as long as it stays within that and earnings grow it will hold onto ratings. Latter was a issue for it last year (EBIT, -2%, stock -20%). Equities recovering this year but analyst consensus remains for continued margin pressure (c EBITDA -4%).
Co has a 20% stake in L'Oreal who is trading sideways this year (~€36b on current market prices). Curve is retail denominated but new lines trades on sensible levels and price some potential rating risk. Jan issued 7y/20y unch vs. index -6 (all vs. swap).
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BONDS: US and UK Roll update
ROLLS continue to dominate, June is not quite yet front Month for Gilt or Treasuries, but will likely be into Tomorrow.
- Ultra 30: 56%.
- TBond: 52%.
- Ultra 10: 52%.
- TYA: 57%.
- FVA: 51%.
- TUA: 57%.
- Gilt: 40% (as of Yesterday).
BUNDS: /SWAPS: Swap Spreads Remain Under Pressure On Debt Brake Reform Risk
BBG headlines note that German 10-Year swap spreads hit an all-time low.
- The headline is based on closing levels if quoting conventional swaps vs. Bunds, spread last ~-8bp, all-time intraday low at -9.26bp.
- Although both Bund vs. 3-month & 6-month Euribor ASWs are at all-time lows, just for completeness.
- Debt brake reform odds continue to weigh on long dated swap spreads/ASWs..
- We've written a lot about how fundamentals continue to screen bearish for long end swap spreads, although debt brake negotiations and already short positioning in spreads may promote vol.
STIR: SFRN5 96.50/97.00 Call Spread Blocked
Latest block trades lodged at 07:56:05 London/02:56:05 NY:
- SFRN5 96.50/97.00 call spread 2.5K lots blocked at 4.25, CME indicates a buyer.
- Another ~3.2K traded on screen around the block.
