NII Holdings Bonds Jump After Telefonica Deal; Credit Swaps Rise

NII Holdings Inc.’s bonds surged to the highest level in seven weeks after the wireless carrier reached a services agreement in Brazil and Mexico with Telefonica SA. A gauge of U.S. company credit risk jumped the most in a month.

NII Holdings’s $800 million of 10 percent notes due 2016 rose 5.5 cents to 60 cents on the dollar as of 3:21 p.m. in New York, the highest level since Nov. 20, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

Telefonica will expand Nextel’s voice and data coverage in Brazil and Mexico on its 3G wireless network, according to a statement today. The deal is “a modest positive” for NII, according to Allyn Arden, a credit analyst at Standard & Poor’s, which cut the Reston, Virginia-based company’s credit rating last week to seven levels below investment grade, citing a “great risk of default over the next few years.”

“The company has experienced delays in deploying a 3G network in Brazil and Mexico, which has resulted in subscriber defections, especially in Mexico, and pricing pressure,” Arden wrote in an e-mail today.

The Markit CDX North American Investment Grade Index, a credit-default swaps benchmark used to hedge against losses or to speculate on creditworthiness, increased 2.2 basis points to 66.2 basis points, according to prices compiled by Bloomberg. The index has climbed from a six-year low of 62 on Dec. 26.

Electricite de France

The swaps measure typically rises as investor confidence deteriorates and falls as it improves. The contracts 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.

Electricite de France SA issued $4.7 billion of debt that included the first 100-year bonds in nine months.

The world’s biggest operator of nuclear reactors offered $700 million of 6 percent securities due in 2114 to yield 240 basis points more than 30-year Treasuries, according to data compiled by Bloomberg. The offering was the biggest dollar-denominated sale of 2014.

The risk premium on the Markit CDX North American High Yield Index, tied to the debt of 100 speculative-grade companies, widened 8.9 basis points to 319.6, Bloomberg prices show. High-yield, high-risk bonds are rated below Baa3 by Moody’s Investors Service and less than BBB- at S&P. A basis point is 0.01 percentage point.

The extra yield investors demand to hold investment-grade corporate bonds rather than government debt fell 0.5 basis point to 109.4, Bloomberg data show.

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