At an auction held today, data vendor Markit and broker Creditex determined final settlement values for credit derivatives trades referencing St Louis- and Chicago-based paper-packaging company Smurfit-Stone Container.
Credit default swaps (CDSs) referencing Smurfit-Stone Container saw recovery rates of 8.875%, meaning protection sellers would need to pay protection buyers who opted for cash settlement at 91.125% of the par value of the CDS contracts.
Recovery rates for loan-only credit default swaps (LCDSs) referencing the company were set at 65.375%.
Because the auction procedure is not hardwired in the standard CDS contract, protocols are required to cash settle CDS and LCDS trades.
On Thursday, February 26, an auction will be held to settle LCDS on Italian luxury yacht manufacturer Ferretti after the company announced on February 2 that it was renegotiating its loan arrangements with Royal Bank of Scotland.
This will be the third-ever cash settlement auction held on European LCDS.
More on Credit Derivatives
China's CDS market needs new structure if it is to win over investors
Arbitrageurs have exited trades, leaving basis structurally higher
Managed deals could be next, but market's potential is expected to be limited
Sign up for Risk.net email alerts
Sponsored video: Tradeweb
Multifonds talks to Custody Risk on being nominated for the Post-Trade Technology Vendor of the Year at the Custody Risk Awards 2014
Sponsored webinar: IBM Risk Analytics
There are no comments submitted yet. Do you have an interesting opinion? Then be the first to post a comment.