Dell Default Swaps Surge on Private-Equity Buyout Talks
The cost of protecting Dell Inc. (DELL)’s debt from losses surged following a report that the personal- computer maker is in buyout talks with private-equity firms.
Five-year credit-default swaps on the Round Rock, Texas- based company’s debt soared 104 basis points to 309 basis points as of 2:41 p.m. in New York, according to data provider CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.
Credit-default swaps, which typically rise as investor confidence deteriorates and fall as it improves, pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt.
Dell is discussing going private with at least two firms, according to a person with knowledge of the matter who asked not to be identified because the talks are private. The discussions are preliminary and could fall apart, according to the report from Bloomberg News.
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