Fitch: DuPont CDS Widest Since 2011 amid Break-Up Speculation

NEW YORK--(BUSINESS WIRE)-- Recent managerial and company-specific developments have sent credit default swap (CDS) spreads for E I du Pont de Nemours and Co. to their widest level in four years, according to Fitch Ratings in its latest CDS Case Study Snapshot.

Ellen Kullman, Du Pont's chairwoman and CEO last week announced she would retire this month and will be replaced by Edward Breen, who joined DuPont's board earlier this year.

Five-year CDS on du Pont have widened out 42% over the past month to price at the widest levels observed since 2011. After pricing consistently in line with 'A/A-' levels over the course of this year, credit protection for DuPont is now pricing in 'BBB' territory.

The CDS movement also comes amid speculation of a break-up and under continued activist investor pressure. Nelson Peltz last year criticized the company's complicated corporate structure and called for a break-up. Breen has notable break-up experience, overseeing two splits when he was chief executive at Tyco Intl.

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.

In August, Fitch affirmed the Issuer Default Rating (IDR) of DuPont at 'A', reflective of the company's DuPont's strong business profile, robust liquidity, and positive free cash flow (FCF) generation. DuPont benefits from global reach, end-market diversification, and leading market positions. The company's product portfolio is primarily research and development-based and often patent protected, enabling sustainable market advantages and high operating profit margins. The consolidated operating EBITDA margin for the latest 12 months (LTM) ended June 30, 2015 was 16.9%.

Additional information is available on www.fitchratings.com.

The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.

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View source version on businesswire.com: http://www.businesswire.com/news/home/20151012006048/en/

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Source: Fitch Ratings

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