Fitch Solutions: CDS Market Showing Signs of Stability for Berkshire Hathaway

NEW YORK--Despite heightened scrutiny surrounding Berkshire Hathaway (BRK), recent credit default swap (CDS) spreads and liquidity performance may be a signal that the market feels more certain over the company's credit outlook, according to Fitch Solutions in its latest update on Global CDS Spreads/Liquidity Scores for companies scheduled to come out with earnings announcements this week.

“In contrast, Bears may see high unemployment and medium-term refinancing prospects as serious threats to retailers.”

Berkshire, recently included in the S&P 500, has been scrutinized in the credit markets since the beginning of 2008. "Protection against a Berkshire Hathaway default is still pricing at a level that is six notches below its current 'AA' rating," said Author and Managing Director Jonathan Di Giambattista. "However, BRK's CDS have been steadily tightening, while its liquidity score has fallen five regional percentile ranks over the past three months."

A slew of retailers are also scheduled to report earnings this week, with evidence pointing to growing confidence among North American companies (5% CDS tightening last week). Retailers such as Target, TJX, Kohl's, Office Depot, Limited Brands and Macy's have also outperformed the broader market over the past quarter. However, retailer liquidity continues to rise. The high degree of liquidity suggests a pivotal point for US retailers, according to Di Giambattista.

"A possible scenario is that Bulls view recent improvement in sector results as the beginning of a sustainable recovery," said Di Giambattista "In contrast, Bears may see high unemployment and medium-term refinancing prospects as serious threats to retailers."

North America:

Berkshire Hathaway Inc. (FINANCIALS/Non-life Insurance)

Credit spreads have tightened over the last three months, with the five-year point tightening from 166 basis points (bps) to 135 bps, a decrease of -19%. The liquidity score on Berkshire Hathaway Inc. decreased from 7.89 to 7.41 over the three-month period, causing a decrease in liquidity from trading in the 13th percentile to the 18th percentile.

Blockbuster Inc. (CONSUMER SERVICES/General Retailers)

Credit spreads have widened over the last three months, with the five-year point widening from 4480 bps to 10698 bps, an increase of 139%. The liquidity score on Blockbuster Inc. decreased from 15.2 to 13.5 over the three-month period, causing an increase in liquidity from trading in the 95th percentile to the 94th percentile.

Cablevision Systems Corporation (CONSUMER SERVICES/Media)

Credit spreads have widened over the last three months, with the five-year point widening from 385 bps to 397 bps, an increase of 3%. The liquidity score on Cablevision Systems Corporation decreased from 8.26 to 7.93 over the three-month period, causing a decrease in liquidity from trading in the 23rd percentile to the 34th percentile.

Gap, Inc. (The) (CONSUMER SERVICES/General Retailers)

Credit spreads have widened over the last three months, with the five-year point widening from 40 bps to 47 bps, an increase of 19%. The liquidity score on Gap, Inc. (The) decreased from 8.4 to 7.65 over the three-month period, causing an increase in liquidity from trading in the 28th percentile to the 26th percentile.

Home Depot Inc. (CONSUMER SERVICES/General Retailers)

Credit spreads have widened over the last three months, with the five-year point widening from 65 bps to 76 bps, an increase of 16%. The liquidity score on Home Depot Inc. decreased from 8.17 to 7.19 over the three-month period, causing an increase in liquidity from trading in the 19th percentile to the 13th percentile.

Interpublic Group of Companies Inc. (The) (CONSUMER SERVICES/Media)

Credit spreads have tightened over the last three months, with the five-year point tightening from 402 bps to 320 bps, a decrease of -20%. The liquidity score on Interpublic Group of Companies Inc. (The) decreased from 8.51 to 7.76 over the three-month period, causing an increase in liquidity from trading in the 31st percentile to the 29th percentile.

Kohl's Corporation (CONSUMER SERVICES/General Retailers)

Credit spreads have tightened over the last three months, with the five-year point tightening from 92 bps to 75 bps, a decrease of -19%. The liquidity score on Kohl's Corporation decreased from 8.46 to 7.27 over the three-month period, causing an increase in liquidity from trading in the 30th percentile to the 15th percentile.

Liberty Media LLC (CONSUMER SERVICES/Media)

Credit spreads have tightened over the last three months, with the five-year point tightening from 397 bps to 361 bps, a decrease of -9%. The liquidity score on Liberty Media LLC decreased from 7.65 to 7.12 over the three-month period, causing a decrease in liquidity from trading in the 8th percentile to the 11th percentile.

Limited Brands (CONSUMER SERVICES/General Retailers)

Credit spreads have tightened over the last three months, with the five-year point tightening from 277 bps to 217 bps, a decrease of -22%. The liquidity score on Limited Brands decreased from 7.4 to 6.56 over the three-month period, causing stayed the same in liquidity from trading in the 3rd percentile to the 3rd percentile.

Lowe's Companies Inc. (CONSUMER SERVICES/General Retailers)

Credit spreads have widened over the last three months, with the five-year point widening from 66 bps to 70 bps, an increase of 7%. The liquidity score on Lowe's Companies Inc. decreased from 8.22 to 7.71 over the three-month period, causing a decrease in liquidity from trading in the 22nd percentile to the 27th percentile.

Macy's, Inc. (CONSUMER SERVICES/General Retailers)

Credit spreads have tightened over the last three months, with the five-year point tightening from 268 bps to 212 bps, a decrease of -21%. The liquidity score on Macy's, Inc. decreased from 7.12 to 6.25 over the three-month period, causing stayed the same in liquidity from trading in the 1st percentile to the 1st percentile.

Nordstrom Incorporated (CONSUMER SERVICES/General Retailers)

Credit spreads have tightened over the last three months, with the five-year point tightening from 115 bps to 82 bps, a decrease of -28%. The liquidity score on Nordstrom Incorporated decreased from 7.91 to 6.96 over the three-month period, causing an increase in liquidity from trading in the 13th percentile to the 7th percentile.

Office Depot, Inc. (CONSUMER SERVICES/General Retailers)

Credit spreads have tightened over the last three months, with the five-year point tightening from 551 bps to 439 bps, a decrease of -20%. The liquidity score on Office Depot, Inc. decreased from 7.52 to 6.68 over the three-month period, causing an increase in liquidity from trading in the 6th percentile to the 4th percentile.

RadioShack Corporation (CONSUMER SERVICES/General Retailers)

Credit spreads have widened over the last three months, with the five-year point widening from 121 bps to 150 bps, an increase of 24%. The liquidity score on RadioShack Corporation decreased from 8.59 to 6.9 over the three-month period, causing an increase in liquidity from trading in the 33rd percentile to the 6th percentile.

Safeway Inc. (CONSUMER SERVICES/Food & Drug Retailers)

Credit spreads have widened over the last three months, with the five-year point widening from 71 bps to 84 bps, an increase of 18%. The liquidity score on Safeway Inc. decreased from 8.4 to 7.49 over the three-month period, causing an increase in liquidity from trading in the 27th percentile to the 21st percentile.

Saks Incorporated (CONSUMER SERVICES/General Retailers)

Credit spreads have tightened over the last three months, with the five-year point tightening from 719 bps to 707 bps, a decrease of -2%. The liquidity score on Saks Incorporated decreased from 7.47 to 7.27 over the three-month period, causing a decrease in liquidity from trading in the 5th percentile to the 15th percentile.

Target Corporation (CONSUMER SERVICES/General Retailers)

Credit spreads have tightened over the last three months, with the five-year point tightening from 75 bps to 56 bps, a decrease of -25%. The liquidity score on Target Corporation decreased from 8.94 to 7.53 over the three-month period, causing an increase in liquidity from trading in the 43rd percentile to the 23rd percentile.

TJX Companies Inc. (CONSUMER SERVICES/General Retailers)

Credit spreads have tightened over the last three months, with the five-year point tightening from 62 bps to 59 bps, a decrease of -5%. The liquidity score on TJX Companies Inc. decreased from 9.47 to 8.16 over the three-month period, causing an increase in liquidity from trading in the 57th percentile to the 41st percentile.

Thomson Reuters Corporation (CONSUMER SERVICES/Media)

Credit spreads have widened over the last three months, with the five-year point widening from 66 bps to 68 bps, an increase of 3%. The liquidity score on Thomson Reuters Corporation decreased from 13.72 to 13.13 over the three-month period, causing a decrease in liquidity from trading in the 91st percentile to the 93rd percentile.

Asia:

Crown Limited (CONSUMER SERVICES/Travel & Leisure)

Credit spreads have widened over the last three months, with the five-year point widening from 72 bps to 77 bps, an increase of 7%. The liquidity score on Crown Limited decreased from 9.39 to 8.57 over the three-month period, causing an increase in liquidity from trading in the 31st percentile to the 21st percentile.

Woolworths Limited (CONSUMER SERVICES/Food & Drug Retailers)

Credit spreads have widened over the last three months, with the five-year point widening from 50 bps to 54 bps, an increase of 7%. The liquidity score on Woolworths Limited decreased from 10.17 to 10.02 over the three-month period, causing a decrease in liquidity from trading in the 73rd percentile to the 77th percentile.

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