Quirk in Europcar Credit Insurance Offers Lucrative Trade
- Cost of buying bonds and credit swaps signals payout above par
- 50 million-euro loan may be used to settle swaps contracts
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An anomaly in credit insurance on Europcar Mobility Group could prove lucrative for some traders as the French rental-car firm seeks to restructure 1.3 billion euros ($1.5 billion) of debt.
The cost of buying Europcar’s bonds and credit-default swaps in a combined trade has risen to 110% of the notes’ face value, indicating that traders expect they’ll get more than par if the insurance pays out, according to Jochen Felsenheimer, who trades both markets as managing director at XAIA Investment GmbH. He doesn’t have a position in Europcar.