Continental Eyes Market For Right Time To Launch Bond -Sources

29th Jun 2010 12:35

By Carol Dean Of DOW JONES NEWSWIRES LONDON (Dow Jones)--German autoparts and tire maker Continental AG (CON.XE) is keeping a close eye on volatile markets for the right time to launch its high-yield bond, given that the company initially intended to issue the bond during the first half of 2010, said people familiar with the situation Tuesday. "They are ready to go but need a bit of [market] stability before launching the deal," one of the people said. Continental said in its January prospectus for its EUR1.1 billion capital increase that it planned to issue the high-yield bond during the first six months this year. But volatile market conditions caused by sovereign debt concerns have made it difficult, but not impossible, for issuers to launch deals. "We continue to work on this issue and will act according to market conditions," a Continental spokesman said. But with only a couple of days to go before the end of the first half, market conditions remain highly volatile. Spreads on European corporate credit default swap indexes were wider Tuesday, after markets in the U.S. and Asia fell overnight as recent data had investors questioning the sustainability of current economic growth. "Risk aversion and volatility remain high given the ongoing sovereign debt crisis .... and are accompanied by rising fears of a double-dip recession scenario in Europe as a result of government austerity measures," said UniCredit SpA analysts in a note Tuesday. At 1115 GMT, the Markit iTraxx Crossover index, which shows the cost of insuring the debt of a basket of 50 mostly sub-investment European corporate borrowers against default, was 28 basis points wider at 572/576 basis points compared with Monday's close. CDS are tradable, over-the-counter derivatives that function like a default insurance contract for debt. If a borrower defaults, the protection buyer is paid compensation by the protection seller. Swap buyers may be protecting investments they own or simply making bearish bets against companies or countries. -By Carol Dean, Dow Jones Newswires; 44 20 7842 9306 [email protected] (Christoph Rauwald in Frankurt, and Art Patnaude and Ainsley Thomson in London contributed to this article.) (END) Dow Jones Newswires June 29, 2010 07:35 ET (11:35 GMT)