An auction run by data vendor Markit and broker Creditex today determined final settlement values for credit derivatives trades referencing Toronto-based telecommunications company Nortel Networks Corp.
Recovery rates for credit default swaps (CDSs) referencing Nortel and its subsidiary Nortel Networks Limited were respectively set at 12% and 6.6%, meaning protection sellers need to pay protection buyers who opted for cash settlement 88% and 93.5% of the par value of the CDS contracts.
Protocols are required to cash settle CDS and LCDS trades, as the use of the auction procedure is not hardwired in the standard CDS contract.
An auction is due on Thursday, February 19 to settle CDSs and loan credit default swaps (LCDSs) on Smurfit-Stone, a St. Louis and Chicago-headquartered paper-packaging company that opted to restructure its debt obligations under the protection of Chapter 11 bankruptcy on January 26, triggering a credit event.
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