LONDON (Bloomberg) — NTL Inc., the UK’s biggest cable-television company, is likely to succeed in its takeover of broadcaster ITV Plc, according to traders betting on the creditworthiness of companies in the credit-default swap market.The perceived risk of owning London-based ITV’s $1.56 billion ($2.97 billion) of investment-grade bonds has soared since below-investment grade rated NTL said it was interested in a “combination”. Credit-default swaps are financial instruments based on corporate bonds and loans that are used to speculate on a company’s ability to repay debt.

NTL, whose bond default in 2002 was Europe’s biggest, may have to borrow as much as $5 billion to fund a cash bid, The Guardian reported ITV’s advertising revenue has declined at its main channel as audiences defect to rivals.

“The transaction seems to be gaining momentum and default swap spreads have moved wider in reaction to this,” said Satyajit Chatterjee, a credit analyst at Societe Generale SA in London. “The strategic logic isn’t that compelling.”

The price of credit-default swaps based on 10 million euros ($12.8 million) of ITV’s debt rose to 182,000 euros from 138,000 euros on November 10, according to data compiled by Bloomberg. The default swaps were trading at about 90,000 euros before NTL made the approach. A decline indicates an improvement in the perception of credit quality; an increase suggests deterioration.

ITV spokesman Jim Godfrey was not immediately available and NTL spokeswoman Liz Nicholson declined to comment.

ITV’s debt is rated Baa3 by Moody’s investors Service, the lowest investment-grade ranking, and an equivalent BBB- by Standard & Poor’s and Fitch Ratings. NTL’s $1 billion of bonds have a high-yield ranking of Ba3 by Moody’s and one level lower at B+ by S&P and Fitch.

Fitch said in a November 10 report that a merger would weaken ITV’s credit quality, although bondholders will have some protection “due to the change-of-control language in some of their bonds”.

The ratings firm said it expected NTL’s credit ranking to be improved by a merger.

“At face value NTL would benefit from a strengthened cash flow and the less leveraged balance sheet of ITV,” Fitch analyst Stuart Reid wrote in a report.