Fiat Credit-Default Swaps Rise on Downgrade Warning From S&P
Credit-default swaps insuring debt of Fiat SpA (F) rose after Standard & Poor’s said the Italian carmaker may face a downgrade because of weakening demand in Europe.
The contracts jumped 53 basis points to 755.35 basis points, according to CMA at 10 a.m. in London. An increase in the cost of credit-default swaps signals deteriorating perceptions of credit quality.
“We see weakening demand in Europe’s oversupplied mass vehicle market, particularly Italy’s,” Robert E. Richards, an analyst for S&P in Frankfurt, said in a statement.
S&P may lower Fiat’s rating by one level to BB- within the next 90 days, Richards said.
A basis point on a credit-default swap protecting 10 million euros ($13.1 million) of debt from default for five years is equivalent to 1,000 euros a year. Swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements.
To contact the reporter on this story: Katie Linsell in London at klinsell@bloomberg.net
To contact the editor responsible for this story: Paul Armstrong at parmstrong10@bloomberg.net
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