ThyssenKrupp downgrade prompts spread widening

The cost of protection on ThyssenKrupp widened by up to 150bp in trading this morning, following its downgrade to junk by rating agency Standard and Poor’s. The downgrade prompted renewed fears about the pension liabilities faced by Thyssen and 11 other corporates named in an S&P report at the start of February. This caused their credit default swap spreads to widen significantly at that time.

S&P lowered its long-term corporate credit rating on German industrial conglomerate ThyssenKrupp to BB+ from BBB and its short-term rating to B from A-2. The agency said the downgrade was due to a rising pension funding gap. This afternoon, five-year credit default swaps on the name were trading off this morning's wides at around 340/380bp, about 100bp wider than at yesterday’s close.

Other European corporates on the S&P creditwatch list due to pension concerns include French steelmaker Arcelor