London-based data provider Markit has announced it will hold a credit-event auction on Ontario-based door manufacturer Masonite International, to settle loan credit default swap (LCDS) trades referencing the company.Masonite, which is a component of series 8-10 of the Markit LCDX North America indexes, entered into a forbearance agreement with bank lenders on September 16.
The turbulence in global financial markets has caused the technical default of a number of popular CDS reference entities, testing the cash-settlement auction process, which is administered by New York-based brokerages Creditex and Markit. The procedure involves a blind auction in which dealers submit tradable two-way prices for the defaulted underlying bonds. Outliers are stripped from the results, while banks are penalised for overly aggressive pricing.
The auction terms and date will be determined soon by Markit LCDX dealers and published on the International Swaps and Derivatives Association website.
The Masonite auction will be the second credit-event auction to take place under LCDS documentation. The first took place on October 23, when US-based video store Movie Gallery failed to make an interest payment on its first lien loan, triggering a failure-to-pay credit event on contracts referencing the company.
More on Regulation
Isda AGM: Proposed trading book rules are “nuts” says BNP Paribas’ Ramambason
Isda AGM: Hedge fund plans to share non-cleared swaps around to reduce trading costs
Risk.net's coverage of Isda's 30th annual general meeting
Isda AGM: Canadian banks will start reporting LCR in second quarter
Sign up for Risk.net email alerts
Sponsored video: MarketAxess
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.