by Kevin Hanly and Jeremy Spain
 

CDS Market Wrap

    
     European market have seen a quiet start to the week in terms of
price action with most sectors trading very close to where they saw the
week out last week. In the wider markets, currencies, commodities and
stocks have also seen very narrow ranges and there seems few catalysts
on the immediate horizon to stir markets, so brokers are suggesting CDS
benchmarks will remain stable or perhaps grind tighter as the week goes
on, similar to what we saw the sector do last week. Xover is currently
3bps wider at 418bps, HiVol is 2bps wider at 112bps and Europe is
unchanged at 75bps.

     Skandinaviska Enskilda Banken (SEB) is looking at selling its
unprofitable German retail banking unit, according to the FT. A sale
would see SEB accept defeat in its decade long efforts to become a force
in the country and restart another phase of consolidation following a
spate of rationalisation due to the financial crisis. SEB has long made
clear its dissatisfaction with the German retail operation, which has
174 branches and around 1 million customers, and has suffered from low
profitability and lack of scale in a market where returns have
historically been among Europe's lowest.

     The Swedish bank has been considering a sale since 2008 but efforts
to find a buyer were abandoned during the financial crisis. SEB is in
the early stages of a deal, which would not include its merchant banking
and real estate operations, and there is no preferred bidder. Reports
are that potential bidders include HVB, which was bought by UniCredit in
2005, with the Italian bank saying in the past that it would consider
acquisitions to increase its scale in Germany. Other names in frame are
Santander and Credit Mutuel, which already has a presence in Germany
with Targobank. Shares in SEB are currently down SEK0.21 trading at the
SEK45.40 level, with CDS spreads around 5 bps tighter at the 105 bps
level.

     In the insurance sector this morning, Scor has upped its estimate
for claims related to the Chile earthquake to E95mil from previous
E27mil. The move was swiftly followed by a broker downgrade, although
the broker in question moved its target price to a level that is still
higher than the current E18.75. CDS is 1bps wider at 64bps.

     Elsewhere in the sector, Assicuraziono Generali and Azimut Holding
have bought stakes in Prysmian, according to Il Sole 24 Ore.
Assicuraziono Generali's CDS is also 1bps wider at 73bps.

     Lastly, Prudential has to convince investors to back its $35.5 bln
acquisition of AIG's Asian units according to the FT. The article says
that the lack of clarity on the AIG is causing some angst among a number
of investors and also the scale of the takeover in the current
environment. Prudential spreads are little changed on the news trading
at 97bps.

     Turning to UK banks, weekend press have focused on government owned
institutions that are going to have to start to sell assets to pay back
government loans and also to satisfy EU regulations. Lloyds Banking
Group is considering spinning off some of its commercial property
portfolio into a separate real estate investment trust, according to the
Independent on Sunday and RBS is in talks to sell a portfolio of
investments in private equity funds as part of its effort to shrink its
balance sheet and dispose of non-core businesses, according to the FT.
However the reports have not supported spreads, with both banks trading
a couple of bps wider.

     Vedanta Resources, is ready to begin a massive break-up of its
business with the demerger of its $20bln aluminium division, according
to the Independent on Sunday. Sources close to Vedanta, confirmed that
an announcement is expected soon, perhaps as early as this week. Over
the next few years, Vedanta intends to spin-off five or six businesses,
which include zinc, iron ore and power, though it will retain
controlling interests in all of them. Vedanta and its advisers, which
include Morgan Stanley, Credit Suisse and JP Morgan Cazenove, believe
that simplifying the ownership structures of the subsidiaries will make
the overall group more valuable.

     After aluminium, Vedanta's Zambian copper business is expected to
be spun-off. Vedanta also has copper operations in Australia and India.
CDS spreads in the firm have tightened 9bps this morning at 464bps.

     BAE Systems will today make a last-ditch bid to build the UK army's
next generation of "Scout" armoured vehicle, according to the FT,
presenting a new offer to create jobs in Newcastle if ministers overturn
a decision on the contract. The defence minister, is set to announce
that General Dynamics of the US is the winner of a fierce competition
worth more than Stg1 billion to build an initial batch of about 750
vehicles, which the US company says will sustain thousands of jobs in
Britain.

     The decision to opt for General Dynamics and to delay plans to
upgrade the Warrior armoured vehicle are a severe setback for BAE
Systems, which saw both contracts as essential for the survival of its
British armoured vehicle business. Shares in BAE are currently down 2.1p
trading at the 376.8p level, although CDS spreads are unchanged at the
85 bps level.

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New Issues Wrap

     Despite a relatively subdued session for European credit and equity
markets so far today, there are still a number of deals to add to the
pipeline this morning.

     Having said that, the markets have remained relatively stable over
the last week, which has led to a significant uptick in primary market
activity.

     The FT reports that companies in southern Europe issued more last
week than in any week over the past 6 months, and this was despite a
moderate increase in borrowing costs spurred by the concerns over the
Greek fiscal situation.

     On the deal front, RBS is to issue a benchmark, 10 year fixed rate
deal in Euros. Price talk is in the mid-market swaps plus 225 bps area
and the deal is to be self-led.

     Telstra Corp is to issue a benchmark, 10 year fixed rate deal in
Euros. Price talk is in the mid-market swaps plus 105 bps area and the
leads are BNPP, Deutsche Bank and JPMorgan.

     Rallye is to issue a E300-500 million, 4 year fixed rate deal.
Price talk is in the 6-6.125% area and the leads are BNPP, Credit
Agricole, Deutsche Bank, Natixis and RBS.

     Nederlandse Waterschapsbank is to issue a Stg200 million, 3 year
fixed rate deal in Sterling. Price talk is in the government bonds plus
low 60 bps area and the leads are HSBC and RBS.

     Banque Federative du Credit Mutuel is to issue a benchmark FRN deal
in Euros. Price talk is in the Euribor plus 50-55 bps area and the leads
are Credit Suisse and HSBC.

     Lastly, Xunta de Galicia is to issue a E500 million fixed rate deal
in Euros. Price talk is in the mid-market swaps plus 145-150 bps area
and the leads are BBVA, HSBC and Socgen.

EURO SUPPLY PIPELINE: Mar. 15

FINANCIALS

* Banco Popolare Espanol - Has hired RBS and UBS to run a covered bond
 program on its behalf, according to sources.
* VEB - Is to issue an inaugural deal in Euros. Leads are Barclays,
 Citigroup, HSBC and SocGen.
* LF Hypotek - Is to issue a benchmark, covered deal in Euros. Leads are
 Credit Suisse, Danske Bank, Deutsche Bank and RBS.
* NIBC Bank - Is to issue a benchmark, covered deal in Euros. The deal
 will be launched following investor presentations and the leads are
 Credit Agricole, Credit Suisse and NIBC.
* Aareal Bank - Is to issue a benchmark, 4 year deal in Euros. Leads are
 Bayerische Landesbank, Commerzbank, Deutsche Bank and DZ Bank.
* RBS - Is to issue a benchmark, 10 year fixed rate deal in Euros. Price
 talk is in the mid-market swaps plus 225 bps area and the deal is to
 be self-led.
* Nederlandse Waterschapsbank - Is to issue a Stg200 million, 3 year
 fixed rate deal in Sterling. Price talk is in the government bonds
 plus low 60 bps area and the leads are HSBC and RBS.
* Banque Federative du Credit Mutuel - Is to issue a benchmark FRN deal
 in Euros. Price talk is in the Euribor plus 50-55 bps area and the
 leads are Credit Suisse and HSBC.

CORPORATES

* Go-Ahead Group - Stg deal, currently roadshowing. Leads will be RBS
 and Barclays.  * Telstra - BNP Paribas, Deutsche Bank and JPMorgan to conduct roadshow.
* Abengoa - Is rumoured to be considering issuing a deal in Euros, at
 some time in the near future. Leads are mooted to be BNPP, Deutsche
 Bank, Calyon, Credit Suisse, Banco Santander and SocGen.
* Vestas - Has hired Nordea, Rabobank, SocGen and UniCredit to arrange a
 European roadshow starting this week.
* Italcementi - Is to issue a benchmark deal in Euros. The deal will
 launched following investor presentations and the leads are Banca IMI,
 BoA-ML, BNPP and SocGen.
* Vale SA - Has announced this morning that it plans to offer
 Euro-denominated notes in the global capital markets. The company will
 use the net proceeds of this offering for general corporate purposes.
* Telstra Corp - Is to issue a benchmark, 10 year fixed rate deal in
 Euros. Price talk is in the mid-market swaps plus 105 bps area and the
 leads are BNPP, Deutsche Bank and JPMorgan.
* Rallye - Is to issue a E300-500 million, 4 year fixed rate deal. Price
 talk is in the 6-6.125% area and the leads are BNPP, Credit Agricole,
 Deutsche Bank, Natixis and RBS.

OTHERS