Sears Looks Like the Next Company With a Head-Scratching CDS Trade
- Cost of protecting retailers’ debt in CDS market has plunged
- Trade comes as homebuilder, newspaper trades roil market
Photographer: David Paul Morris/Bloomberg
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For the past two years, credit-derivatives traders have been betting almost certain odds that Sears Holdings Corp. will default on its debt. Now, those wagers are being turned upside down by a complex proposal from the retailer’s biggest shareholder.
Eddie Lampert’s ESL Investment Inc., the hedge fund that owns the most Sears shares, last month urged the retailer to sell some of its businesses, and said it would look to buy them. As part of its proposal, the fund said that Sears should buy back what had been some of its lowest-priced debt.