Market analysts consider impact of resolution regimes on CDS market
The US Federal Deposit Insurance Corporation claims its new resolution powers would deliver a 97% recovery to senior bondholders if Lehman Brothers failed today. If markets buy that argument, a leap in recovery assumptions could have knock-on effects on credit spreads, bond prices and even the cost of capital. Michael Watt reports
“Look at what you could have won,” was the catchphrase for the UK’s darts-based gameshow, Bullseye, in the 1980s – traditionally heard while a car was unveiled in front of a glum contestant clutching a toaster. Senior bondholders in Lehman Brothers found out how that feels in April, when the US Federal Deposit Insurance Corporation (FDIC) told them they would have received 97 cents on the dollar if the bank had collapsed today, rather than the 21.4 cents they would receive under the terms of a
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