iHeart CDS saga sparks debate over credit rules

Trigger decision highlights product's weaknesses, warns Milbank’s Williams

Decision over trigger event has led to warnings over the effectiveness of CDS products

Lawyers have raised concerns about potential weaknesses in credit default swaps (CDS) as a result of the decision to trigger iHeart Communications’ contract in January.

The International Swaps and Derivatives Association’s Americas Credit Derivatives Determinations Committee (DC) declared a failure-to-pay trigger event had occurred on the San Antonio-based radio broadcaster’s CDS on December 21 – despite the arguments of some lawyers – after it repaid notes held by outside investors but didn’t