Fitch Solutions: Planned Merger Drives Dixons CDS Tighter

Five-year Credit Default Swaps (CDS) on Dixons Retail Inc. have tightened 35% over the past month, outperforming the broader European retail sector, which widened 5% over the same time period.

"The boost in CDS market sentiment for Dixons Retail is likely attributed to shareholders approving the merger with Carphone Warehouse Group to create the UK's largest retailer of mobile phones and electronics," said Diana Allmendinger, Director, Fitch Solutions.

Although Dixon's CDS Implied Rating (CDS IR) currently stands at 'BB+' (up three notches over the past year), based on present spreads, the CDS market is pricing Dixon's default risk in line with 'BBB' levels or as a low investment grade credit.

"CDS liquidity for the retailer has decreased in recent weeks, down 10 rankings to trade in the 47th regional percentile, signalling less market uncertainty over future pricing levels," Allmendinger added.

Fitch Solutions case studies build on data from its CDS Pricing Service and proprietary quantitative models, including CDS Implied Ratings. These credit risk indicators are designed to provide real-time, market-based views of creditworthiness. As such, they can and often do reflect more short term market views on factors such as currencies, seasonal market effects and short-term technical influences. This is in contrast to Fitch Ratings' Issuer Default Ratings (IDRs), which are based on forward-looking fundamental credit analysis over an extended period of time.

Fitch Solutions, a division of the Fitch Group, focuses on the development of fixed-income products and services, bringing to market a wide range of data, analytical tools and related services. The division is also the distribution channel for Fitch Ratings content.

Fitch Ratings and Fitch Solutions are part of the Fitch Group, a jointly-owned subsidiary of Fimalac, S.A. and Hearst Corporation. For additional information, please visit 'www.fitchsolutions.com'; 'www.fitchratings.com'; 'www.fimalac.com' and 'www.hearst.com'.