Holders of credit default swaps referencing electronics firm Thomson were able to cash-settle their trades on October 22, more than 10 weeks after a credit event was declared.
Three auctions were held by Markit and Creditex to determine the recovery rate for Thomson’s bonds and loans, which were split into buckets with maturity limitation dates of 2.5 years, 5 years and 7.5 years.
The recovery rate in the 2.5 year bucket was 96.25%, meaning protection sellers will have to pay out just 3.75 cents for every euro of debt insured. In the 5-year bucket, the recovery rate was set at 65.125%, meaning sellers will have to pay out 34.875 cents for every euro. And in the 7.5 year bucket, the recovery rate was set at 63.25%, meaning sellers will pay out 36.75 cents for every euro.
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