Sunday, 22 July 2018

Equifax bonds keep plunging as probe widens

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Bonds of credit reporting company Equifax tanked further on Thursday as a probe into its massive data breach expanded, including calls for the company’s leaders to resign.

The US Federal Trade Commission said it was investigating the breach, which reportedly put data at risk for 143 million people - or almost half the US population.

The company’s 3.3% 2022s were 8bp wider at T+145bp, while its 2.3% 2021s were 7bp wider at T+117bp in thin secondary trading, according to MarketAxess data.

They are now 30bp and 48bp wider respectively since the breach was revealed on September 7. Its shares have lost about one-third of their value over the same period.

CEO Richard Smith is expected to testify before Congress on October 3.nL2N1LV0UW

“Equifax is running out of time to fully unveil a response,” said Jaret Seiberg, an analyst at investment banking and research firm Cowen.

“Getting ahead of Washington will result in less political pressure on Equifax to make management changes and reduces the risk that Washington attacks the overall business model.”

US Senator Chuck Schumer said Equifax must provide affected consumers with at least 10 years of free credit monitoring services to help compensate for the data breach.

And he said Smith and company board members might need to resign.

Rating agencies have so far taken only moderate measures in response to the breach. S&P affirmed its BBB+ rating on Equifax but revised its outlook to negative from stable.

“With considerable uncertainty, including potential for impacts on strategy, substantial litigation, fines and costs related to the incident, we expect that leverage could remain elevated above 2x over the next two years,” S&P said.

Moody’s said the breach was credit negative as it will impede earnings growth over the next three to four quarters. But the rating agency said its Baa1 rating was unaffected.


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