France Telecom credit protection trades actively

A raft of new developments related to struggling France Telecom caused a marked increase in volatility and turnover in its credit derivatives, as traders attempted to digest both facts and speculation. Traders saw both a significant number of buyers were looking for credit protection as well as speculators betting on the likelihood of a restructuring event.

Yesterday, France Telecom reported a €12.2 billion loss for the first half and a €10.8 billion charge related to its 28.5% stake in German mobile operator MobilCom, which its board voted to end financially supporting. Michel Bon, France Telecom chairman, resigned from France Telecom, but no formal announcement was made that the telco was planning a €10-€15 billion rights issue, a move widely expected in the market.

The non-decision on the rights issue caused five-year credit protection on France

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